Most economists surveyed in a Reuters poll taken Sept. 4-9 expect the Federal Reserve to leave its policy rate unchanged at its Sept. 15-16 meeting and to maintain that stance through the end of the year, despite recent strength in economic data and renewed market pricing for tighter policy.
The poll found that roughly 70% of respondents - 65 of 93 economists - anticipate the federal funds rate will remain in the 3.50%-3.75% target range next week. That share has fallen from 90% in the August poll, reflecting growing uncertainty about the Fed's path.
Forecasters are split on prospects beyond the immediate meeting. About 56% of economists, or 52 of 93, now predict the central bank will hold rates steady for the entire year, a decline from 80% in recent months. The remainder expect at least one quarter-percentage-point increase before year-end - a proportion more than double last month - which, if it occurred, would be the first hike since July 2023.
Several contributors to the poll said this month's Consumer Price Index (CPI) reading for August, due on Friday, will be pivotal for their outlooks. With the Fed chair moving to a policy of limited forward guidance, economists say their conviction around forecasts has weakened and that they are more prepared to revise expectations quickly when fresh data arrive.
"If everything plays out as we’re expecting, then they’ll stay on hold next week. But if there’s an upside surprise on the inflation data, they’re not going to wait around. They’re likely to start a hiking cycle," said Eli Nir, U.S. economist at TD Securities.
Views among primary dealers are more evenly distributed. Of those polled, 11 dealers expect policy to remain on hold for the year, 10 expect at least one rate increase, and one participant, Jefferies, forecasts a rate cut.
The Federal Open Market Committee itself showed signs of internal division at its July 28-29 meeting, when three members voted for a rate increase. Fed Chair Kevin Warsh’s remarks at the Jackson Hole symposium were widely interpreted as hawkish, and markets have since moved to price in additional tightening: futures now reflect expectations for two rate hikes by March.
Market moves since Jackson Hole include a roughly 20 basis point rise in two-year Treasury yields, while the 10-year Treasury yield is trading close to 5%. Oil futures have climbed back above $100 a barrel amid renewed escalation in the Middle East, a development market participants note alongside central bank rhetoric. Officials in the Trump administration have signalled that a 5% yield on the 10-year Treasury is a threshold they do not want breached.
"In my view, Chairman Warsh coming out firmly in the camp of the hawks at Jackson Hole means that a hike is probable this month unless Friday’s CPI release brings a substantial downside surprise," said Stephen Stanley, chief U.S. economist at Santander.
September has been a consequential month for Fed policy in recent cycles. The central bank initiated its most recent easing cycle in September 2024 and resumed cutting rates last September after about an eight-month pause, making the timing of upcoming inflation data especially salient for participants deciding whether to alter the policy course.
A separate Reuters poll of the August CPI expected a 0.4% month-on-month rise following a 0.1% increase in July, and analysts expected the year-on-year CPI rate to hold at 3.4%. Meanwhile, the Personal Consumption Expenditures (PCE) Price Index - the Fed's preferred inflation gauge - remains well above the 2% target and has been elevated for more than five years. That persistence of above-target inflation is adding political pressure on President Donald Trump’s fellow Republicans as they seek to maintain control of Congress in the November midterm elections. Trump has also threatened broad trade restrictions if the Fed does not cut rates.
Economists in the Reuters poll left their PCE inflation projections unchanged from last month, forecasting annual PCE inflation at 3.5% for this year and 2.4% in 2027, and expect inflation is unlikely to return to the Fed’s 2% goal before 2028. The unemployment rate is forecast to remain near 4.1%.
The poll captures a snapshot of evolving market and policymaker signals: while a majority still count on no immediate move from the Fed, a growing minority now expects a rate increase this year if incoming data - and Fed communication - point to stronger inflationary pressures. For market participants, Treasury yields, oil prices and coming CPI and PCE releases will likely be the near-term catalysts that determine whether that minority view broadens into a new consensus.