Economists Expect Fed to Cut Rates by 25 Basis Points in December

A clear majority of economists surveyed by Reuters in a poll conducted Nov. 28 to Dec. 4 said they expect the Federal Reserve to trim its policy rate by 25 basis points at the Dec. 9 to 10 meeting. Of 108 respondents, 89 or roughly 82 percent predicted a quarter point reduction, reflecting market implied expectations that investors have priced in.

The consensus among economists contrasts with a public split among Fed officials who have signaled different priorities in recent weeks. Some policymakers have emphasized the risk that inflation remains above the central bank's target and argued for caution, while others have pointed to cooling labor market metrics and a string of weak data as justification for easing. That internal division has created uncertainty about the Fed's path beyond the imminent meeting.

Economists who favored a cut cited several indicators suggesting reduced pressure on the economy, including slowing job growth and softer demand in sectors that had previously been resilient. Those who cautioned against cutting highlighted headline and core inflation readings that have not yet returned comfortably to the Fed's 2 percent goal and warned that premature easing could reignite price pressures. The poll captured both lines of argument without producing a consensus on the appropriate policy stance for 2026, where forecasts diverged markedly.

Market participants have largely aligned with the poll results, pricing in a high probability of a quarter point move. For markets, a Fed cut would likely ease short term borrowing costs and could support risk assets in the near term, while pushing down short term yields. At the same time, expectations of future policy remain mixed, and any signal from the Fed that it intends to resume tightening next year would test investor confidence and could push yields higher.

The Reuters poll also flagged broader risks that complicate the Fed's calculus. Respondents identified fiscal policy dynamics and tariff related uncertainty as potential wildcards that could shift economic momentum and influence inflation. Fiscal stimulus or contraction can alter demand pressures, while trade policy disruptions can feed through to prices and supply chains, making the economic backdrop harder to interpret for policymakers.

As the Fed prepares to convene, attention will focus on the language of any rate decision and the accompanying economic projections and commentary from officials. Economists will be watching for guidance on the committee's outlook for inflation, labor markets and the balance of risks that will shape where policy stands in 2026. The poll results suggest that while a December cut is widely anticipated, the debate over the timing and sequencing of future adjustments to policy remains unresolved, leaving markets and policymakers to navigate a narrow path between supporting growth and containing inflation.