Fed to lower rates in Dec but slow pace in 2025 on inflation risks: Reuters poll
BENGALURU - The U.S. Federal Reserve will trim interest rates next month but make shallower cuts in 2025 than expected just a month ago due to the risk of higher inflation from President-elect Donald Trump's proposed policies, according to most economists in a Reuters poll.
Still, nearly 90% of economists, 94 of 106, in the Nov. 12-20 Reuters poll expected a 25bp cut in December, taking the fed funds rate to 4.25%-4.50%. Twelve expected no change, compared to only three in last month's survey. "We'll see deregulation, easier fiscal policy, more protectionist trade policy and a tighter immigration stance. They all kind of pose an upside risk to inflation...the Fed is unlikely to cut as deeply as we previously considered because they're going to see inflation continue to be stuck above their target.
"Keep in mind unemployment is still relatively low and, especially with increased border security, it would not take long for wage pressures to creep back up. This only reinforces our long-held call the Fed's cutting cycle will be cut short in 2025." Among 72 common contributors in this and last month's poll, two-thirds, 48, lifted their end-2025 rate forecasts by around 50bps on average.
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