WASHINGTON — On Wednesday, Federal Reserve officials are expected to indicate a more gradual approach to interest rate cuts in the upcoming year compared to recent months. This adjustment implies that consumers may experience only minimal relief from persistently high borrowing costs for various loans, including mortgages, auto finance, and credit cards.

The Fed is anticipated to announce a reduction of a quarter-point in its benchmark interest rate, sliding from around 4.6% to approximately 4.3%. This decision would come after a significant half-point cut in September followed by another quarter-point reduction in November. However, this meeting may signify a transition in monetary policy: instead of instituting a rate cut at every meeting, the Fed is more likely to implement them every other meeting or even less frequently. Policymakers may now predict only two or three rate cuts throughout 2025, down from the four reductions they had forecasted just three months ago.

The rationale behind the Fed’s recent actions has been characterized as a “recalibration” of the elevated rates initially established to combat inflation, which had soared to a 40-year high in 2022. Inflation has now decreased significantly, with the latest figures showing a rate of 2.3% in October, down from a peak of 7.2% in June 2022. Despite these improvements, many officials believe that the current interest rates are higher than necessary.

Nevertheless, inflation has remained persistently above the Fed’s 2% target in recent months, while the economy continues to grow robustly. A government report released on Tuesday revealed that U.S. consumers, particularly those with higher incomes, are still engaging in significant spending. Such trends raise concerns among some analysts regarding the potential risks of additional rate cuts, which could overly invigorate the economy and exacerbate inflation pressures.

Adding to the economic landscape, President-elect Donald Trump has introduced a proposal involving various tax reductions, including on Social Security benefits and overtime income, alongside the easing of certain regulations. These initiatives could potentially encourage economic growth. Conversely, Trump has also signaled intentions to impose tariffs and pursue mass deportations of migrants, both of which may contribute to rising inflation levels.

Chair Jerome Powell, along with other officials at the Fed, have indicated that they will need to gather more information on the impact of Trump’s policies on the economy and on their future rate decisions before making assessments. As of now, the uncertainty surrounding the presidential election has predominantly increased economic unpredictability.

Consequently, it appears unlikely that consumers will see significantly lower borrowing costs in the near term. Recently, the average 30-year mortgage rate stood at 6.6%, according to Freddie Mac, which is below the peak of 7.8% recorded in October 2023. However, the lower mortgage rates of around 3% that were commonplace before the pandemic are not expected to return anytime soon.

Fed officials have stressed that they are approaching a reduction in rates cautiously as they near what is known as the “neutral” interest rate—an equilibrium that neither stimulates nor restricts economic growth.

Powell recently remarked, “Growth is definitely stronger than we thought, and inflation is coming in a little higher. The good news is, we can afford to be a little more cautious as we try to find neutral.”

In addition, many central banks globally are also engaged in cutting their benchmark rates. Last week, the European Central Bank enacted its fourth rate cut of the year, lowering its key rate from 3.25% to 3%, as inflation among the 20 countries utilizing the euro declined to 2.3%, down from a high of 10.6% at the end of 2022.