WASHINGTON — Wall Street expects the Federal Reserve to cut its benchmark interest rate by a quarter-point Wednesday, but some analysts question whether that will be enough.

The Fed surprised financial markets Sept. 18 by making a larger-than-expected half-point cut to its benchmark federal funds rate, the rate banks charge each other for overnight loans. It serves as a beacon for a wide array of lending rates in the broader economy.

In September, the Fed set aside its worry about emerging inflation, deciding that problems in credit markets and a deepening housing slump warranted a big chop in lending rates to spark economic activity.

Since then, credit problems have eased, particularly related to the short-term debt issued by profitable, sound corporations. Earnings reports by many companies have exceeded analyst expectations, and fears of a job slump appear overblown.

Normally, that would point to the Fed's policymaking body — the Federal Open Market Committee — doing nothing about interest rates at the end of its two-day meeting Wednesday. After all, a rate cut amid strong economic activity could reignite inflation. Oil is already at more than $90 a barrel — itself inflationary.

So why do markets expect a rate cut? Because the economy is projected to slow sharply over the next six months, offsetting inflationary threats. And the housing bust is becoming a bigger drag on the economy.

If the fed makes the small quarter-point cut, it will bring the fed funds rate to 4.5 percent. That will trigger commercial banks to cut their prime rate — the price they charge for lending to their best customers — to 4.5 percent as well.

Rate cuts lower the cost of borrowing for everything from car loans to credit card debt, thus sparking economic activity.

Analysts aren't unanimous about what the Fed will do Wednesday, or what it should do. Some see the summer's turmoil on Wall Street as a speed bump that slowed a strong economy. Others see an end approaching for a business-cycle expansion that began in November 2001 and a possible recession next year.

"We believe a 25-basis-point move is more likely since many Fed officials probably continue to view the current episode as a mid-cycle slowdown rather than an all-out fight against a possible recession," the economic research team of Goldman, Sachs & Co. wrote in a note to investors Monday. "In our view, however, a 50-basis-point move would be preferable because a 4.5 percent federal funds rate is still too high, given the outlook for inflation and economic growth."

The Fed will announce its decision after seeing third-quarter economic growth numbers, which the Commerce Department is due to release Wednesday morning. Most mainstream economists expect that the economy will have shrugged off the summer's financial turmoil and will have grown by a 3.5 percent to 3.8 percent annual rate.

That strong third-quarter growth may make the Fed reluctant to cut beyond a quarter-point Wednesday, reserving the option of notching down lending rates again in the committee's final meeting of the year Dec. 11.