WASHINGTON (MarketWatch) -- The Federal Reserve is likely to cut the federal funds rate as low as it can go at this week's meeting, without adopting a zero-interest policy, and to begin shifting its focus to nontraditional policies.

"It would make the most sense for this meeting to be the last rate cut rather than dragging it out to the January meeting," wrote Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi, adding that a "hallmark of the Bernanke Fed has been to move quickly and aggressively."

Rupkey's forecast calls for the Fed to cut rates by three-quarters of a percentage point to 0.25%. Most Wall Street firms expect a rate cut of a half point to 0.50%. See full story on rate-cut forecasts.

"The size of the move is in large part psychological," said the economic team at Bank of America. See full story.

Rates are already very low and are not playing much part in the credit crunch that is strangling the economy.

Investors should know that the Fed still has plenty of ways to stimulate the economy, even with rates near or at zero, economists said.

The bottom line on Fed policy is supply of money. The Fed typically targets the price of money, but, with the price so low, it will focus on increasing the quantity of money through its balance sheet.

Vince Reinhart, a former senior Fed staffer who is now at the American Enterprise Institute, said the Fed will make a promise in its policy statement "to use the balance sheet to help foster economic recovery and better-functioning markets."

The two-day meeting got underway Monday afternoon. A public statement is expected at 2:15 p.m. Eastern time Tuesday.

Since the last Fed meeting, economic conditions have deteriorated, and many economic indicators have been setting multiyear lows.

The recession has turned into a global downturn, with similar weakness in Europe and Japan and many emerging economies.

The Fed meeting was originally set to last just one day, but an extra day was added to discuss various options for "quantitative easing" operations.

Economists at Barclays Capital said they expect the Fed statement "to give some guidance on how the Fed expects to proceed" in the area of nontraditional monetary policy.

In essence, the Fed is providing credit directly to market participants, bypassing the fragile banking sector. The Fed's balance sheet has already expanded dramatically as the Fed has lent money to banks, securities firms and public companies.

"A lot has been done already," said J. Alfred Broaddus, a former president of the Richmond Fed.

Total Fed assets on its balance sheet have soared $1.3 trillion of 145% since Sept. 10, according to the UBS economic team.

Fed officials have already signaled that more balance-sheet expansion is planned. The Fed is expected to make plain that its monetary-policy focuses include the funds rate and balance-sheet growth, said the economic team at Bank of America. The Fed may also add that it plans to purchase securities in markets that particularly need liquidity.

With this money flowing into the banking sector, many economists are worried about inflation down the road. But other economists do not believe that will pose a significant threat.