97% of US Economists Say 'Fed to Cut Rates After Q3'

"Expected End-of-Year Rate: 3.75~4.00%"…50bp↓ from Current

"Strong Job Market, High Tariffs Keep Inflation Pressures High"

US economists expect the Fed to keep rates steady for at least a few more months, citing the risk that President Trump's tariff policies could spark another surge in inflation. On the 10th (local time), Reuters reported that all but 2 of the 105 economists surveyed predicted the Board of Governors of the Federal Reserve System (Fed) would hold the federal funds rate steady at a 4.25~4.50% range this month. About 55% (59 people) of the 105 economists expect the Fed to resume rate cuts in the third quarter, most likely reflected in rate futures pricing in September. This outlook is unchanged from last month. 42% (44 people) expect the FOMC to cut rates in Q4 2025 or later. Twenty said they do not expect any rate cut this year.

Jonathan Pingle, Chief US Economist at UBS, said, "As long as the jobs market remains robust, I expect the FOMC to maintain its pause stance."

With trade talks between the US and several countries still unresolved, experts remain cautious about the US economy's vulnerability. Although the House of Representatives passed a tax cut bill, its failure in the Senate is causing further concern among economists regarding the surge in bond issuance and US debt growth.

Labor Department employment data from last week showed the US job market remains solid, signaling the Fed has little incentive to cut rates soon.

Inflation expectations based on high US tariffs remain elevated. Consumers expect price pressures to surge in the next few years, and economists predict that inflation will stay well above the Fed's 2% target at least until 2027.

James Egelhof, Chief US Economist at BNP Paribas, said, "High tariffs will continue, and therefore high inflation is set to persist into 2026." He added, "The lesson from history is that once inflation takes root in the economy, it's very difficult and costly to remove."

When asked about the expected rate at the end of 2025, 85 out of 105 economists (80%) predicted the federal funds rate would be in the 3.75~4.00% range.

President Trump called Friday for an immediate 1 percentage point cut to 3.25%–3.50%. A bill already signed by the president is projected to add $2.4 trillion to America's already massive $36.2 trillion national debt, making a rate cut even less likely.

Bill Adams, Chief Economist at Comerica Bank, said, "With more fiscal stimulus expected from this bill, I see less need for the Fed to cut rates."

Fiscal policy is expected to widen the fiscal deficit, exerting ongoing upward pressure on long-term rates—a potential headwind for credit-intensive sectors like housing and business capital spending.

With a widening trade deficit, the economy, which shrank 0.2% last quarter, is forecast to grow just 1.4% this year—a sharp fall from 2.8% in 2024.

Jung-A Kim, Contributing Reporter kja@hankyung.com