A new survey of economists by Bloomberg says two Federal Reserve rate cuts are projected to come in September and December this year — but that may not come without economic pain.
Currently, the benchmark federal funds rate controlled by the central bank sits between 4.25% and 4.50%. A double cut of 25 basis points would bring the range down to 3.75% and 4%. Expectations are that the Fed will keep interest rates where they are in the Federal Open Market Committee this week after its meeting.
About 11% of the economists polled expect the Fed to slow the pace of quantitative tightening, the process of reducing the organization’s portfolio of assets, with 41% expecting that to happen in the second quarter.
Recommended For You
The report doesn’t mention how many economists were surveyed or any description of them. But it did name two: Scott Anderson, chief US economist at BMO Capital Markets, and Kathy Bostjancic, chief economist at Nationwide Financial.
Of late, uncertainty has flummoxed financial markets. President Donald Trump has implemented tariffs and threatened others on top of the three largest trading partners of the US: Mexico, Canada, and China.
“The Fed is in a very tough spot right now, facing a more stagflationary outlook even as core inflation remains well above its medium-term target,” Anderson told Bloomberg in an interview.
Stagflation historically has been the combination of slowing economic growth, high inflation, and elevated unemployment, as in the 1970s when the term was introduced. However, recently the definition has shifted a bit and focused on dual parts of slower growth and relatively high inflation. Unemployment has remained at historically low levels.
“Uncertainty around the magnitude, duration and targets of future tariffs further complicates the monetary policy outlook. They have the potential to roil monetary policy expectations as well as financial markets,” Anderson added.
Most of the economists who responded to the poll saw risks of rising inflation and unemployment as the biggest worries.
About 74% of respondents expect weaker economic growth in 2025 compared to a similar poll at the close of 2024. Another 19% hasn’t changed their expectations and 7% expect stronger growth.
Around 66% expect higher inflation, which in theory would make it less likely for the Fed to reduce interest rates in the near future.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
