Reuters poll: Fed seen on hold through September as Middle East war drives inflation higher. 71 of 103 economists still expect one cut in 2026; nearly a third now forecast no cuts at all.
Summary
- 56 of 103 economists expect Fed funds rate to hold at 3.50%-3.75% through September
- 71 of 103 still forecast at least one cut in 2026; median projection is a single reduction
- Nearly a third now expect no cuts this year, up from roughly one in six in the previous poll
- PCE inflation forecasts revised up ~30bps: 3.7% Q2, 3.4% Q3, 3.2% Q4
- Middle East war cited as primary driver via fuel and energy price pressures
- Fed chair nominee Kevin Warsh’s Senate testimony did not shift economist views
- Unemployment and growth forecasts broadly unchanged: ~4.3% and ~2% respectively
Expectations for a U.S. Federal Reserve interest rate cut have been pushed back significantly, with a majority of economists now forecasting that borrowing costs will remain unchanged through at least September, according to the latest Reuters poll conducted April 17–21.
The shift reflects the inflationary impact of an ongoing Middle East conflict now entering its second month, which has driven fuel and energy prices sharply higher, eroded consumer confidence to record lows, and effectively eliminated earlier market pricing for rate reductions. Even the Fed’s more dovish policymakers have acknowledged that inflation remains uncomfortably elevated, removing any sense of urgency to move.
Of 103 economists surveyed, 56 expect the Fed’s benchmark rate to hold in the 3.50%–3.75% range through the end of September. That compares with nearly 70% who had anticipated at least one reduction by that point in a late-March survey, and a majority expecting a cut as early as June in polling from early March.
Despite the delay, most forecasters are not abandoning rate cut expectations entirely. Seventy-one economists still foresee at least one reduction before year-end, in line with the Fed’s own dot-plot projections. However, nearly a third now expect rates to remain on hold throughout 2026, almost double the proportion recorded in the prior survey.
Inflation forecasts have been revised upward for a second consecutive poll. The Fed’s preferred measure, the Personal Consumption Expenditures index, is now expected to average 3.7% in the second quarter, 3.4% in the third, and 3.2% in the fourth — roughly 30 basis points above late-March projections and well above the Fed’s 2% target.
Economists remain notably more sanguine on inflation than households, who are reporting price rises of closer to 5% over the year ahead, particularly for gasoline and energy. Several analysts warned that the gap between professional forecasts and consumer expectations raises the risk of inflation expectations becoming unanchored.
The poll was conducted largely ahead of the Senate confirmation hearing for Kevin Warsh, President Trump’s nominee to succeed Fed Chair Jerome Powell. Warsh called for a change in approach at the Fed during his testimony but denied making any commitment to Trump to lower rates. Economists contacted after the hearing said it did not materially alter their outlooks, with several noting that a single leadership change is unlikely to shift the policy committee’s direction without broader consensus.
Forecasts for unemployment and economic growth were little changed, with joblessness expected to average around 4.3% and GDP growth around 2% in the coming years.
