Fed Chair Jerome Powell warned after last week’s rate cut that the job market is even weaker than it appeared.
It would be the third cut in a row and bring the Fed's key rate to about 3.6%, the lowest in nearly three years.
Wednesday's decision brings the Fed's key rate down to about 3.9%, from about 4.1%.
The Fed also signaled it would cut rates just once in 2026, down from two cuts projected in March.
Inflation picked up last month as prices rose for gas, eggs, and used cars, yet underlying price pressures also showed signs of easing a bit.
The latest move follows a larger-than-usual half-point rate cut in September and a quarter-point reduction in November.
The officials are set to reduce their benchmark rate by a quarter-point to about 4.3% when their meeting ends Wednesday.
The average rate on a 30-year mortgage in the U.S. eased this week, though it remains near 7% after mostly rising in recent weeks.
The economy grew at a solid annual rate of just below 3% over the past six months.
Some reports on the U.S. economy helped bolster hopes that it can manage to avoid a recession.