A broad survey of economists conducted April 17-21 indicates the U.S. Federal Reserve will wait at least six months before cutting interest rates, a delay driven in large part by renewed energy-price pressures stemming from an almost two-month war in the Middle East.
Respondents said the conflict has pushed up fuel costs, driven consumer confidence to record lows and effectively removed market-implied odds of early rate cuts. Even policymakers within the Fed who typically favor lower rates have warned that inflation remains uncomfortably high, diminishing urgency for near-term easing.
The latest poll shows forecasters have moved back the expected timing for the first rate reduction compared with earlier surveys, though the majority still forecast at least one cut later in the year. Economists' inflation expectations remain considerably lower than those reported by households, which are seeing sharper price increases since the onset of the war, particularly for gasoline and other energy items.
What the poll found
- Out of 103 economists surveyed, 56 predicted the Fed's benchmark interest rate would remain in the 3.50%-3.75% range by the end of September.
- That stands in contrast with a survey in late March, when nearly 70% of economists expected at least one reduction by that date.
- Earlier in March, most respondents had anticipated a cut by the end of June.
- There was no consensus on where rates would finish the calendar year, but 71 economists still expected at least one cut before year end.
- The median forecast anticipates a single reduction, a projection that mirrors the Fed's own dot-plot projections released last month.
Nearly a third of the economists surveyed now expect rates to remain unchanged for the entire year - almost double the share recorded in the prior poll.
Timing, politics and Fed leadership
The poll was conducted largely prior to the confirmation hearing for the Fed chair nominee, Kevin Warsh, before a U.S. Senate committee on Tuesday. Economists contacted after the hearing said the testimony did not materially alter their forecasts.
Several economists who responded to the survey stressed that one new nominee would not immediately shift the policy trajectory. Michael Gapen, chief U.S. economist at Morgan Stanley, said: "We have a favorable outlook broadly similar to the Fed's, where tariff inflation is transitory and oil puts upward pressure on headline inflation but doesn't translate into faster core inflation. Therefore, the Fed will be able to ease rates later this year." He added that "the main risk to our call is parts of inflation do not behave as favorably as we think they will and the Fed just stays on hold."
U.S. President Donald Trump has publicly expressed confidence that Warsh would lower rates if confirmed and said he would be disappointed if it did not happen. In his testimony, Warsh denied making any such promises and used the phrase "regime change" in reference to the central bank. Brett Ryan, senior U.S. economist at Deutsche Bank, cautioned: "Warsh is just one voice and he would need to convince the (Fed's policy-setting) committee if he were to come in with the idea of cutting quickly. He's going to need some time to earn the credibility, the trust of the committee."
Adam Schickling, an economist at Vanguard, emphasized the limited immediate impact of a single new Fed member: "Changing just one member of the Fed is really not enough to change our view of what policy is going to be doing."
Inflation and labor forecasts
Surveyed economists raised their near-term forecasts for the Fed's preferred inflation gauge, the Personal Consumption Expenditures Price Index. The poll's median projections show annual PCE inflation of about 3.7% in the second quarter, 3.4% in the third quarter and 3.2% in the fourth quarter - roughly 30 basis points higher across those quarters compared with forecasts published in late March.
The Fed's inflation target remains 2%. While the economists' upward revisions mark the second consecutive increase in the poll, they still stand well below consumer expectations, which see inflation near 5% over the coming year.
Deutsche Bank's Brett Ryan warned that, given inflation has missed the Fed's target for much of the past five years, the central bank must guard against inflation expectations becoming unanchored.
Forecasts for unemployment and economic growth were largely unchanged in the poll. Economists expect joblessness to average about 4.3% in coming years - near current levels - and project growth to average roughly 2%.
Note: This article reflects the consolidated findings and direct comments from economists and policymakers referenced in the survey. It does not introduce new forecasts beyond those reported by the respondents or officials quoted above.