BENGALURU, Dec 4 (Reuters) – The U.S. Federal Reserve will reduce its key interest rate by a quarter-percentage point at the December 9-10 policy meeting to support a cooling labour market, according to a majority of over 100 economists surveyed by Reuters.
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Despite disagreements over both that decision and the path ahead, a markedly large 82% majority, 89 of 108 economists in the November 28-December 4 Reuters poll, predicted a 25-bps reduction.
“I’m expecting the Fed will cut at the meeting next week. I know there’s been a lot of back and forth especially after October about Powell being somewhat hawkish, but that, I think, was more about a lack of available data due to the shutdown,” said Thomas Simons, chief U.S. economist at Jefferies.
“While it makes sense why he would be concerned, he can’t necessarily make the same argument again in December. We’ve seen enough support for continued cuts from most of the Board of Governors in their public comments since that meeting.”
But as many as five of the 12 voting members have publicly voiced opposition to cutting rates further.
GAP IN INFLATION EXPECTATIONS
Survey forecasts for 2026 reflected that lack of consensus. While medians pointed to two additional cuts bringing the federal funds rate to 3.00-3.25% by year-end, there was no clear majority on any quarter.
Fiscal worries from the administration’s sweeping tax-cut and spending bill, tariff uncertainties and concerns about the central bank’s independence were key reasons.
“Some of the reflationary forces at play, whether it’s on the fiscal side with the ‘big beautiful bill’ or the persistent stickiness in goods prices driven by tariffs – that’s going to keep the Fed a bit restricted in what they can do next year,” said Kevin Gordon, head of macro research and strategy for the Schwab Center for Financial Research.
A stark gap also exists in inflation expectations: University of Michigan consumer surveys see it near 4%, while market-implied gauges such as breakevens and Treasury Inflation-Protected Securities sit far lower.
“There is a bit of a disconnect there, so that’s another thing the Fed has to keep in mind. How people view inflation is still, in many ways, the number one problem with affordability being the key operative word,” Schwab’s Gordon added.
Poll medians showed the Personal Consumption Expenditures index – the Fed’s preferred inflation measure – running above 2% through 2027.
The U.S. economy likely expanded 3.0% in Q3, slowing to 0.8% this quarter. It was predicted to average 2.0% this year and in 2026.
(Other stories from the Reuters global economic poll)
Reporting by Sarupya Ganguly; Analysis by Renusri K; Polling by Aman Kumar Soni, Reshma Ann Samuel and Jaiganesh Mahesh; Editing by Chizu Nomiyama
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