The Federal Reserve slashed its benchmark interest rate by a half-point on Wednesday, its first cut in four years as the central bank sought to tame persistently high inflation.

"Our economy is strong overall and has made significant progress toward our goals over the past two years," said Fed Chairman Jerome Powell at a briefing on Wednesday. "The labor market has cooled from its formerly overheated state, inflation has eased substantially from its peak of 7% to an estimated 2.2% as of August."

Powell went on to say that the Fed is "committed" to "maintaining our economy's strength" by supporting the goals of maximum employment and returning inflation to its goal of 2%, and said their decision to cut its benchmark rate "reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of a moderate growth and inflation moving sustainably down to 2%."

"Recent indicators suggest that economic activity has continued to expand at a solid pace," the Fed said in a statement announcing its dramatic shift. "Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 percent objective but remains somewhat elevated."

The Fed came as close as its been in years to declaring victory over inflation, saying in its statement that it "has gained greater confidence that inflation is moving sustainably toward 2 percent."

"In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent," the statement continues, adding that they also expect to cut their key rate by an additional half-point in their final two meetings this year, in November and December.

Fed policymakers also envision four more rate cuts in 2025 and two in 2026.

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.

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. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.

Harris called the announcement "welcome news for Americans who have borne the brunt of high prices," but acknowledged that prices are "still too high" for most working families and pledged to lower costs.

"That is why I am proposing plans to cut taxes for more than 100 million working and middle-class Americans, pass the first-ever federal ban on corporate price gouging on food and groceries, and make housing more affordable by building 3 million new homes and giving more Americans down payment assistance," Harris said in a statement released by her campaign. "But we also need to go further to create an opportunity economy where, with hard work and ambition, everyone has a chance to compete and a chance to succeed – from buying a home to starting a business and building wealth."

She also sought to contrast her economic plans against those proposed by Trump.

“This election is about whether we are going to finally build an opportunity economy that gives every American a shot not just to get by, but to get ahead," she added. "As President, that will be my priority every day.”

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%, according to Freddie Mac, spurring a jump in demand for refinancings.

The Fed’s next policy meeting is Nov. 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. Yet Politico has reported that even some key Senate Republicans who were interviewed have expressed support for a Fed rate cut this week.

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 from its half-century low in April 2023 to a still-low 4.2%. 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% to 3.5%.