NEW YORK (CNN/Money) - Federal Reserve policy-makers will be closely watched Tuesday as they decide whether or not to take action to boost the economy -- although hopes of an interest-rate cut have already begun to fade.

Wall Street will be especially interested in the Fed's announcement, due at about 2:15 p.m. ET, with many hoping against hope for a cut in short-term interest rates or a shift in the central bankers' attitude about the economy -- from one of calm neutrality to one of worry.

They're probably going to be disappointed, most economists say.

"While the equity market and accounting issues and corporate scandals are weighing on the economy, it is still fundamentally sound," said Merrill Lynch senior economist Gerald Cohen. "The recovery process hasn't been derailed. We still think the economy is going to grow at about a 3.5-percent pace in the second half -- fast enough to keep the Fed from easing, but not fast enough to cause them to tighten this year."

In fact, of 22 primary dealers that do business with the Fed, only one, Morgan Stanley, expects a rate cut, according to a Reuters poll.

Morgan Stanley expects the Fed to cut its target for the federal funds rate, an overnight bank lending rate, by half a percentage point, to 1.25 percent from 1.75 percent. If it doesn't make that cut on Tuesday, Morgan economists Dick Berner and Dave Greenlaw said in a research note, it will do so by September.

"We believe [Fed] officials want to insure that economic hesitation does not turn into broader-based economic weakness," Berner and Greenlaw said.

Economists at Goldman Sachs and three other banks also believe the Fed will cut later this year. Though their expectations represent the hopes of many on Wall Street, they're voices crying in the wilderness at this point.

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Even if Chairman Alan Greenspan and other policy-makers don't cut rates on Tuesday, they could still re-word the usually brief statement that accompanies their decision to say they see a greater risk of weakness in the economy. Since March of this year, they've said risks were balanced between weakness and inflation.

But only seven of the 22 primary dealers surveyed by Reuters believe the Fed will even do that.

"The Fed will not shift its bias. Retail sales numbers for August, which they'll have in hand by the time of the meeting, will be pretty solid, so they will be facing essentially the same thing they've been facing for a while now -- the fundamentals are not that bad, but the stock market is," said Joel Naroff, president and chief economist at Naroff Economic Advisors in Holland, Pa.

"They're going to say they're carefully watching the issues in the equity markets and are prepared to act if necessary, but right now the risks remain balanced," Naroff added.

The Fed cuts short-term interest rates to lower the cost of borrowing and encourage spending. It raises rates to fight inflation by tightening the money supply. It cut rates 11 times in 2001 to fight a recession that the National Bureau of Economic Research said began in March of that year.

It may seem hard to believe now, but as recently as three months ago, just before the Fed's May meeting, most economists thought the Fed would be raising rates by at least a quarter percentage point in August.

That expectation was turned on its head by persistent stock-market weakness throughout June and July, raising fears that the weakness could erode consumer and business confidence and slow the economy down again.

Then, in rapid succession two weeks ago, the Commerce Department drastically revised its readings of gross domestic product (GDP) last year to show contraction in three straight quarters, the Institute for Supply Management reported a dramatic slowdown in manufacturing activity in July, and the Labor Department said job growth in July was nearly dead in the water.

Wall Street's alarm bells really started ringing at that point, and rumors spread that a rate cut was on the way.

"We saw weakness in the economy, and that's the basis on which I'd say it is very possible they may cut rates," said John Davidson, President and CEO of PartnerRe Asset Management Corp. "The real key is watching the economic indicators -- an awful lot of people look at the stock market and say, 'Greenspan needs to save us.' He has said he doesn't [make policy] for that reason. He will respond to weakness in the economy."

But Davidson and other economists noted that one week's unpleasant data do not a double-dip recession make. In fact, just a few weeks ago, Greenspan told Congress that the economy was on its way to recovery, though that recovery could be slow and spotty. How much has really changed since that time?

"It's unreasonable to expect that the information we have so far could justify another cut right now," said Anthony Chan, chief economist at Banc One Investment Advisors. "We need to see more evidence the economy is headed for much slower growth in the months ahead."

Economists also pointed out that the Fed's current target for the federal funds rate is at a 40-year low, a level Greenspan has called "accommodative" -- meaning the economy's accelerator is floored -- and the Fed will be very reluctant to take rates lower than that and risk raising comparisons with Japan, where interest rates are near zero but the economy still can't get going.

But other economists believe the Fed could avoid the Japan syndrome by slashing rates dramatically rather than making incremental, quarter-percentage-point cuts, if it becomes apparent that it's absolutely necessary.

"There's no question that, given the right circumstances, the Fed wouldn't hesitate to spend 175 basis points," said Bank One chief economist Diane Swonk. "But they really have to have a good reason to put an insurance policy out there."

In any event, it's not certain how much good a Fed rate cut would do for the economy, with consumers and businesses already stretching their borrowing to the limit. Consumer credit, for example, grew in June to more than $1.7 trillion, beating economists' expectations, and there are already widespread fears of a corporate credit crunch.

"To have an effective monetary policy, you have to have a robust borrowing and lending cycle," said Lacy Hunt, chief economist at Hoisington Investment Management. "The problem is that households and businesses are both overextended, while banks have problems with their current loan base. So we don't have a viable borrowing and lending cycle, which means that monetary policy is not working effectively."

Hunt said he thought the Fed, instead of pegging a certain funds rate, should pump money into bank reserves.

He also criticized the Fed for adopting a neutral policy stance in March, saying that led markets to believe a Fed tightening was on the way, undercutting the recovery.

"The net effect was to induce a tightening mode in the markets, in bank lending and in total bank reserve growth, while [interest rates] rose significantly, especially for corporate bond issues," Hunt said. "In retrospect, that's not looking very smart."