Economists Predict Shift in U.S. Interest Rate Outlook, Poll Reveals
A recent poll indicates a significant shift in the outlook for U.S. interest rates as economists look toward 2026. Conducted by Reuters, this survey reveals varied expectations among financial experts regarding future rate adjustments by the U.S. Federal Reserve.
Current Predictions for Interest Rate Cuts
The survey, carried out from October 15 to October 21, included 117 economists. It shows that a majority still expect the Federal Reserve to reduce its benchmark interest rate by 25 basis points on October 29, followed by another cut in December. Nonetheless, there is growing division among experts regarding prospective rate directions after these anticipated cuts.
Specifics of the Poll Findings
- October Rate Cut: Nearly all economists agree on a 25 basis point reduction.
- December Projection: Only 71% anticipate another 25 basis point cut.
- End of 2026 Forecast: Predictions for the Fed Funds Rate vary widely between 2.25% and 4%.
Factors Influencing Economic Outlook
Economists cite multiple challenges affecting their predictions. The current government shutdown in Washington, D.C., has led to a lack of crucial economic data. Moreover, concerns about inflation and the weakening U.S. labor market add layers to the uncertainty.
Compounding these issues is the impending change in leadership at the Federal Reserve, with current Chair Jerome Powell’s term ending in May 2024. President Donald Trump pushes for more aggressive rate cuts, yet a significant 76% of surveyed economists warn against the risk of excessive rate reductions.
Market Reactions
The potential changes in interest rates are closely monitored by various sectors, particularly investors. For example, the SPDR S&P 500 ETF Trust (SPY) currently holds a “Moderate Buy” rating among Wall Street analysts, with 419 buy recommendations and an average price target suggesting a 12.21% upside from current levels.
As the economic landscape continues to evolve, stakeholders will watch closely for further developments regarding interest rate policies and their implications for financial markets.
