washington – No one knows how Tuesday’s presidential election will turn out, but the Fed’s move in two days’ time is much easier to predict: With inflation continues to coolThe Fed is expected to cut interest rates for a while second time this year.

The presidential race may still be unresolved when the Fed ends its two-day meeting Thursday afternoon, but that uncertainty will have no bearing on the Fed’s decision to cut its benchmark interest rate further. But the Fed’s future actions will become even more volatile once a new president and Congress take office in January, especially if Donald Trump regains the White House.

Economists said Trump’s proposals to impose high tariffs on all imports and mass deportations of unauthorized immigrants and his threats to interfere with the Fed’s normally independent interest rate decisions could lead to rising inflation. High inflation will force the Fed to slow or stop interest rate cuts.

On Thursday, Fed policymakers led by Chairman Jerome Powell are on track to cut benchmark interest rates by a quarter point to about 4.6%, after implementing a half-point cut in September. Economists expect another quarter-point rate cut in December and possibly similar moves next year. Over time, interest rate cuts tend to lower borrowing costs for consumers and businesses.

The Fed cuts interest rates for a different reason than it usually does: It often cuts interest rates to stimulate a stagnant economy and a weak job market by encouraging more borrowing and spending. But the economy is growing rapidlyand unemployment rate a low 4.1%Government on Friday, despite hurricanes and strike at Boeing sharply subdued net job growth last month.

Instead, the central bank is cutting interest rates as part of what Powell calls a “recalibration” toward a lower inflation environment. When inflation rose to 9.1 percent in June 2022, the highest level in four decades, the Fed raised interest rates 11 times, ultimately sending the key interest rate to 5.3 percent, also the highest level in four decades.

However, annual inflation in September dropped to 2.4%It is slightly above the Fed’s 2% target and equal to its 2018 level. With inflation down so far, Powell and other Fed officials have said they think high borrowing rates are no longer necessary. High borrowing rates often restrict growth, especially in interest rate-sensitive sectors such as housing and auto sales.

“The restriction was imposed because inflation was rising,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer high. The reason for the restriction has disappeared.”

Fed officials claimed that interest rate cuts would be gradual. However, almost all of them expressed support for some additional discounts.

“The big question for me is how much and how quickly to cut (the Fed’s key) interest rate target, which I believe is currently set at a restrictive level,” said Christopher Waller, an influential member of the Fed Board of Governors. he said in a speech last month.

Jonathan Pingle, an economist at Swiss bank UBS, said Waller’s statement reflected “unusual confidence and belief that interest rates will fall.”

Next year the Fed will likely begin to wrestle with the question of how low its benchmark interest rate should be. They may eventually want to set it at a level that neither restricts nor stimulates growth (“neutral,” in the Fed’s parlance).

Powell and other Fed officials acknowledge they don’t know exactly where the neutral rate is. In September, the Fed’s rate-setting committee predicted it would be 2.9%. Most economists think it’s closer to 3% to 3.5%.

The Fed chairman said officials should evaluate where neutrality lies in terms of how the economy will respond to rate cuts. For now, most officials are confident that the Fed’s current interest rate is well above the neutral level at 4.9%.

But some economists argue that the Fed doesn’t need to ease credit too much, if at all, given that the economy looks healthy despite high borrowing rates. The idea is that these may be close to the level of interest rates that currently neither slow nor stimulate the economy.

“If the unemployment rate stays below 4 and the economy is still going to grow at 3%, does it matter if (the Fed’s) interest rate is between 4.75% and 5%?” asked Joe LaVorgna, chief economist at SMBC Nikko Securities. “Why are they cutting it now?”

With the Fed’s last meeting coming just after Election Day, Powell will likely field questions about the outcome of the presidential race and how it could affect the economy and inflation at his Thursday news conference. The Fed can be expected to reiterate that its decisions are in no way influenced by politics.

During his presidency, Trump imposed tariffs on washing machines, solar panels, steel and a host of products from China, a move President Joe Biden pursued. Although research has shown that washing machine prices have increased, general inflation has not increased much.

But Trump is now proposing significantly larger tariffs (essentially import duties) that would increase the prices of goods coming from overseas by nearly 10 times.

Many mainstream economists are alarmed by Trump’s latest proposed tariffs, saying they would almost certainly reignite inflation. A report by the Peterson Institute for International Economics concluded that Trump’s main tariff proposals are as follows: It will increase inflation by another 2 percentage points next year than it would have been otherwise.

“Given that Trump has threatened much larger increases in tariffs,” the Fed may be more likely to raise rates in response to tariffs this time around, according to economists at Pantheon Macroeconomics.

“Accordingly, if Trump wins, we will reduce the funding rate reduction in our 2025 forecasts,” they wrote.