Fed avoids cuts in 2026, Reuters poll

Reuters reported on May 19 that economists have largely abandoned calls for Federal Reserve rate cuts in 2026 and now expect the central bank to stay on hold this year. A Reuters poll conducted May 14-19 found 83 of 101 economists expected the federal funds rate to remain in a 3.50%-3.75% range through the third quarter. Less than half now see rates falling at any point this year, down from just over two-thirds in the previous month’s poll. The shift comes as forecasters continue to treat the recent inflation pickup as temporary, even as market pricing has turned more hawkish. ### What changed in this Reuters poll? The May 14-19 Reuters poll showed a clear change from April. Reuters said less than half of economists now expect the fed funds rate to fall this year, compared with just over two-thirds who expected at least one cut a month earlier. A near-50% minority, 49 of 101 economists, predicted no move at all in 2026, up from about one-third previously. Nearly a third still expected one cut this year, mostly in December, while four economists saw at least one hike. (money.usnews.com) April’s Reuters poll had pointed to a later easing path, not a full hold. In that April 17-21 survey, 56 of 103 economists expected the benchmark rate to remain at 3.50%-3.75% through the end of September, while 71 still expected at least one cut in 2026 and the median forecast was for a single reduction. (money.usnews.com) ### Why did economists push cuts into 2027? Reuters said economists broadly pushed the rate outlook further into the future because they still viewed the inflation spike tied to the war in Iran as transitory. The poll report said forecasters expected the energy-driven rise in prices to be temporary and unlikely to spread broadly into other consumer prices. (kitco.com) Aditya Bhave, head of U.S. economics at Bank of America, told Reuters that “the base case is a hold” and that if the Fed’s next move is a cut, “it’s more likely to be next year than this year.” Bhave also said there were “certainly risks of higher inflation” and “a lot of uncertainty” around the forecast. (money.usnews.com) ### How does that compare with what markets are pricing? Interest rate futures have moved in a different direction from the economist consensus. Reuters said futures markets were narrowly pricing in a 25-basis-point hike by the end of January, while the benchmark 10-year Treasury yield had risen above 4.6%, its highest level in more than a year. (money.usnews.com) That gap matters because the Reuters poll describes economists still expecting a benign inflation path, while market pricing reflects concern that inflation could stay elevated for longer. Reuters attributed that divergence to uncertainty around the inflation outlook and the economic effects of the Iran war. (money.usnews.com) ### What has the Fed itself said recently? The Federal Reserve held the target range at 3.50%-3.75% at its April 28-29 meeting. In its statement, the Fed said it would “carefully assess incoming data, the evolving outlook, and the balance of risks” when considering any further adjustments. The April meeting also exposed internal divisions. (money.usnews.com) Reuters said three policymakers dissented in favor of dropping language that implied a bias toward future cuts, while one policymaker voted for an immediate cut. Reuters separately reported those three dissenters were Cleveland Fed President Beth Hammack, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari. (federalreserve.gov) ### Where does Kevin Warsh fit into this? Reuters said economists do not expect incoming Fed Chair Kevin Warsh to deliver the cuts sought by President Donald Trump. The April Reuters poll said economists contacted after Warsh’s Senate testimony did not change their forecasts, and Michael Gapen, chief U.S. economist at Morgan Stanley, said the main risk to his call for cuts later this year was that inflation would not cool as expected and “the Fed just stays on hold.” (money.usnews.com) The Federal Reserve’s next scheduled policy meeting is June 16-17, 2026. That meeting follows the April 28-29 decision to leave rates unchanged and will be the next formal checkpoint for whether policymakers keep the 3.50%-3.75% range in place. (federalreserve.gov) (fixedincome.fidelity.com)