The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates helped tame inflation but also made borrowing painfully expensive for American consumers.

The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing. Coming just weeks before the presidential election, the Fed’s move also has the potential to scramble the economic landscape just as Americans prepare to vote.

The central bank’s action lowered its key rate to roughly 4.8 percent, down from a two-decade high of 5.3 percent, where it had stood for 14 months as it struggled to curb the worst inflation streak in four decades. Inflation has fallen to a three-year low of 2.5 percent in August, not far above the Fed’s 2 percent target, from a peak of 9.1 percent in mid-2022.

The Fed’s policymakers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings this year, in November and December. And they envision four more rate cuts in 2025 and two in 2026.

In a statement, the Fed came closer than it has before to declaring victory over inflation: It said it “has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Though the central bank now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent, and other necessities. President Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.

Rate cuts by the Fed should, over time, lower borrowing costs for mortgages, auto loans, and credit cards, boosting Americans’ finances and supporting more spending and growth. Homeowners will be able to refinance mortgages at lower rates, saving on monthly payments, and even shift credit card debt to lower-cost personal loans or home equity lines. Businesses may also borrow and invest more.

Average mortgage rates have already dropped to an 18-month low of 6.2 percent, according to Freddie Mac, spurring a jump in demand for refinancings.

The Fed’s next policy meeting is November 6-7 — immediately after the presidential election. By cutting rates this week, soon before the election, the Fed is risking attacks from Trump, who has argued that lowering rates now amounts to political interference.

The central bank’s officials fought against high inflation by raising their key rate 11 times in 2022 and 2023. Wage growth has since slowed, removing a potential source of inflationary pressure. And oil and gas prices are falling, a sign that inflation should continue to cool in the months ahead. Consumers are also pushing back against high prices, forcing such companies as Target and McDonald’s to dangle deals and discounts.

Yet after several years of strong job growth, employers have slowed hiring, and the unemployment rate has risen nearly a full percentage point to 4.2 percent from its half-century low in April 2023. Once unemployment rises that much, it tends to keep climbing. Fed officials and many economists note, though, that the rise in unemployment this time largely reflects an influx of people seeking jobs — notably new immigrants and recent college graduates — rather than layoffs.

At issue in the Fed’s deliberations is how fast it wants to lower its benchmark rate to a point where it’s no longer acting as a brake on the economy — nor as an accelerant. Where that so-called “neutral” level falls isn’t clear, though many analysts peg it at 3 percent to 3.5 percent.

Associated Press