The Federal Reserve will keep interest rates unchanged at the end of its Jan. 29 meeting and resume cuts in March, according to a majority of economists polled by Reuters, as officials weigh a range of new economic policies in the United States.
The latest survey, conducted the week before President-elect Donald Trump’s inauguration on Jan. 20, also suggests that persistent inflationary pressures could allow the Fed to cut rates once again.
Concerns about Trump’s promises, ranging from across-the-board import tariffs to tax cuts and mass deportation of illegal immigrants, have already contributed to a surge in Treasury yields before he took office.
The outlook for an already strong economy and the Fed’s rate trajectory will depend on how aggressively the new administration delivers on these promises.
“If they deliver anything close to what they promised on tariffs, we will likely see disinflationary pressures stagnate and the Fed will not make cuts,” said Jonathan Millar, senior U.S. economist at Barclays.
Since the Fed’s last interest rate cut in December, inflation has slowed and the labor market has shown resilience, suggesting that further economic stimulus may not be necessary for an economy that is already firing on all cylinders.
All 103 economists participating in the survey predicted that the Federal Open Market Committee will keep interest rates stable between 4.25% and 4.50% at its meeting on January 28-29. Nearly 60% of economists, 61, expected the Fed to cut in March.
Nearly 65% of economists, 65 of 102, expect two or fewer cuts this year. That’s changed from three or more, a view economists have held since August 2024.
According to the research, at the end of 2025 the rate will be between 3.75% and 4.00%, much higher than the 3.00-3.25% predicted a few months ago.
But the chances of an extended pause are growing amid concerns that looming policies, particularly large tariffs on the country’s largest trading partners, could reignite inflationary pressures.
The median of the survey showed inflation will remain above the Fed’s 2% target until at least 2027, while a strong majority of economists – 40 of 49 – said inflation will likely be higher than expected. expected this year, no lower.
However, the vast majority of respondents, 43 out of 49, believe the Fed is unlikely to raise rates this year.
Source: Terra
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