The US Federal Reserve is about to cut interest rates for the first time in over four years. At the next meeting in the coming week, the key interest rate could be lowered by 0.25 to 0.50 percentage points. This prospect has significantly increased investors' bets on a larger rate cut in recent days.

Traders in the swap markets are now pricing in a 49 percent chance of a half-point cut. As recently as Thursday, this probability was only 15 percent. Market experts such as Mark Dowding from RBC BlueBay Asset Management consider such a rate cut "very likely.

This expectation drove up US stock markets, with the S&P 500 and Nasdaq Composite recording the strongest weekly gains of the year – 4 and 6 percent, respectively.

Some analysts, including the former President of the New York Fed, Bill Dudley, see a "strong need" for a 0.5 percentage point cut to support growth at a current interest rate level of 5.25 to 5.5 percent, the highest in 23 years. The Fed has typically made rate moves of 0.25 percent in the past, but a larger step could serve as a preventive measure against an economic slowdown.

The discussions about the extent of the interest rate cut are taking place just before the US presidential election, further amplifying the significance of this decision. Experts expect that the US economy could be guided towards a "soft landing," where inflation is curbed without triggering a recession.

Despite a return of overall inflation to 2.5 percent, close to the Fed's target of 2 percent, core inflation remains high at 3.2 percent, primarily due to pressures in the housing market. This presents the Fed with a tough decision.