No one knows how Tuesday’s presidential election will turn out, but the Federal Reserve’s move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year

Summary

With inflation near target, the Federal Reserve, led by Jerome Powell, is set to cut its benchmark rate by a quarter-point, to about 4.6%, its second reduction this year.

Despite low unemployment and strong growth, the Fed seeks to recalibrate after previous rate hikes. Economists support gradual cuts but debate the “neutral” rate that sustains growth without restriction.

A Trump presidency and proposed tariffs could reignite inflation, potentially prompting the Fed to adjust its approach.