WASHINGTON – For the first time in more than four years, the Federal Reserve appears ready to lower interest rates to prevent a housing meltdown and a painful credit crunch from driving the economy into a recession. A rate cut would affect millions of borrowers, with the intention of getting them to spend and invest more, which would revitalize the economy. In one of their most important and anxiously awaited decisions, Fed Chairman Ben Bernanke and his central bank colleagues meet Tuesday to determine their next move on interest rates. Those policymakers are widely expected to cut an important rate, now at 5.25 percent, by at least one-quarter of percentage point. Some analysts predict a bolder step, a half-point reduction. If the Fed drops the rate, then the prime lending rate that commercial banks charge many individuals and businesses would fall by a corresponding amount. It now is at 8.25 percent. Less immediate would be relief for the country’s economic health. An expected series of rate decreases could take three months to nine months before rippling through the economy and bolstering activity. “It’s like taking an antibiotic. After you take the first dose, you don’t feel immediately better. But after a series of dosages accumulate, there will be a more positive effect,” explained Stuart Hoffman, chief economist at PNC Financial Services Group. Over the short term, a rate cut would provide an important psychological boost. It could make investors, businesses and others less inclined to clamp down or make drastic changes in their behavior that would hurt the economy. Fears that the deepening housing slump and a spreading credit crisis could short-circuit the six-year-old economic expansion have shaken Wall Street over the past few months. Stocks have swung wildly, with sharp drops reflecting investors’ bouts of panic. A recent government report showing that the economy lost jobs for the first time in four years delivered a fresh jolt. The biggest fear is that individuals and businesses will cut back on spending, throwing the economy into a tailspin. By Zandi’s odds, there now is a 40 percent chance the economy will fall into a recession – the highest probability since the last recession, in 2001. Just two months earlier, Zandi believed there was only a 12 percent chance. So far, though, consumers have not cracked. Retail sales rose a modest 0.3 percent in August, after a 0.5 percent gain in July, the government reported Friday.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! “It’s no longer a debate over whether they will ease but by how much,” said Mark Zandi, chief economist at Moody’s Economy.com. “The economy is soft and getting softer,” and the Fed has come under economic and political pressure to act. Should the Fed go with a quarter-point cut, analysts expect policymakers will lower the rate again in October and in December, their final meeting of the year. Fed action would mean that borrowers who can obtain credit would see rates drop on a variety of loans. It would become less expensive for people to finance certain credit card debt and for homeowners to take out popular home equity lines of credit, which often are used to pay for education, home improvements or medical bills. Also, it should help some homeowners whose adjustable-rate mortgages reset in the fall. “Borrowers facing a rate reset Oct. 1 might see their ARM rates adjust to 6.7 percent, for example, rather than the 7.5 percent that a borrower whose loan adjusted back on July 1 experienced,” said Greg McBride, senior financial analyst for Bankrate.com. “Still a big increase, but not the knockout punch it could have been,” he said.