A Reuters poll of economists indicates the U.S. Federal Reserve is likely to wait at least six months before cutting interest rates this year, pushing back earlier expectations for monetary easing. The delay is attributed to persistent inflation pressures, exacerbated by rising energy prices stemming from the ongoing conflict in the Middle East, now nearing two months in duration.
The latest poll, conducted between April 17 and 21, shows a clear shift in expectations. A narrow majority of 56 out of 103 economists now expect the Fed’s benchmark interest rate to remain within the 3.50%–3.75% range by the end of September. This marks a significant change from late March, when nearly 70% of respondents anticipated at least one rate cut by that time. Earlier in March, most economists had forecast a reduction by June.
Despite the delay, most forecasters still expect at least one rate cut later in the year, with 71 economists predicting at least one reduction before year-end. However, nearly one-third now believe rates may remain unchanged throughout 2026, a notable increase from the previous survey.
Inflation expectations have been revised upward. The Fed’s preferred measure, the Personal Consumption Expenditures (PCE) Price Index, is now projected to rise at an annual rate of 3.7% in Q2, 3.4% in Q3, and 3.2% in Q4. These projections are about 30 basis points higher than estimates from late March, though they remain below consumer expectations, which are close to 5% for the coming year.
Brett Ryan, senior US economist at Deutsche Bank, warned of the risks of persistent inflation, stating, "With the backdrop to inflation missing their target for the better part of five years, they really need to be careful of inflation expectations becoming unanchored."
The poll was conducted largely before Kevin Warsh’s confirmation hearing for Fed chair. Economists contacted after his testimony said their views remained unchanged. Michael Gapen, chief US economist at Morgan Stanley, noted, "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." Warsh, nominated by President Donald Trump, denied promising rate cuts during his testimony but called for a "regime change" at the Fed.
