American consumers, battered by falling home prices and soaring gasoline prices, are at their gloomiest in decades, raising fears they might cut back on spending later this year and tip the economy into a recession.

Consumer confidence plunged in June to its lowest level since 1992, and home-price declines accelerated in April, according to data released Tuesday. The renewed signs of economic weakness underscored why Federal Reserve policy makers, who wrap up a two-day meeting Wednesday, are likely to hold the target for their...