Economists are predicting a 25 basis point rate cut by the Federal Reserve at the September meeting. The expectation for the rate reduction is bolstered by a decline in labor market conditions.
Consensus Among Economists on Rate Cuts
A survey conducted by Reuters shows that a large majority of the 107 economists surveyed expect the Federal Reserve to cut interest rates by 25 basis points at their September meeting. This move would bring the target rate range down to 4.00–4.25 percent. Only two economists in the survey believe that a more substantial 50 basis point cut is possible.
Forecasts for Rate Cuts and Economic Conditions
Markets are currently considering the possibility of three rate cuts next year. Meanwhile, 60% of economists surveyed expect at least an additional 50 basis point reduction by the end of the year, with 37% foreseeing a total cut of 75 basis points. Participants also believe that consumer prices will remain above the Federal Reserve's 2% target until 2027.
Political and Economic Factors
Data from the CME FedWatch indicate a 92.7% probability of a 25 basis point cut by the Federal Reserve on September 17, and a 7.3% probability of a 50 basis point cut. In the political arena, President Donald Trump has called for a stronger cut of 75 to 100 basis points. Within the Federal Reserve itself, there are known divisions among members regarding interest rate policy.
Overall, economists predict that the Federal Reserve's rate reduction process could extend into the coming years, with an additional easing of 75 basis points anticipated by 2026.
