First interest rate cut in 4 years likely on the horizon as the Federal Reserve meets

With the end of their two-year fight against inflation in sight, Federal Reserve officials are likely Wednesday to set the stage for the first cut to their key interest rate in four years, a major shift in policy that could eventually lower borrowing costs for U.S. consumers and businesses.

Inflation has been falling steadily closer to the Fed's 2% target for the past several months. And the job market has cooled, with the unemployment rate rising about a half-point this year to 4.1%. Fed officials have said that they are seeking to balance the need to keep rates high enough to control inflation without keeping them too high for too long and causing a recession.

Rate cuts — as early as September — could help the Fed achieve a “soft landing,” in which high inflation is defeated without an economic downturn. Such an outcome might also affect this year's presidential race, as Republicans have sought to tie Vice President Kamala Harris to the inflation spike of the past three years. Former President Donald Trump said the Fed shouldn't cut rates before the election.

“While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Christopher Waller, a member of the Fed's governing board, said earlier this month.

Financial market traders have priced in 100% odds that the central bank will reduce its benchmark rate at its Sept. 17-18 meeting, according to futures markets, so Fed Chair Jerome Powell does not need to provide further guidance to markets Wednesday about the timing of a cut, economists say.

Instead, Powell will have more opportunities in the coming months to illustrate how the Fed is thinking about inflation and interest