Foreign media survey: 90% of economists predict that the Federal Reserve will announce a 25 basis point rate cut next week

According to a survey by foreign media, 90% of economists predict that the Federal Reserve will announce a 25 basis point rate cut at its policy meeting on December 18, lowering the federal funds rate to 4.25%-4.50%. Meanwhile, most economists expect the Federal Reserve to pause further rate cuts in late January, mainly due to concerns over rising inflation risks.

The policies proposed by Trump—from import tariffs to tax cuts—are expected to create inflationary pressure. Trump is likely to quickly push his policy agenda after taking office on January 20, which could have significant implications for the Federal Reserve's monetary policy.

Data released last Friday showed that the U.S. job market is slowing down but still exhibits some resilience. This result further supports the possibility of the Federal Reserve cutting rates again in December. Barclays senior U.S. economist Jonathan Miller stated, "Given that the employment report shows more slack in the labor market, but income and job growth are robust, we reaffirm our prediction of a 25 basis point rate cut by the Federal Reserve in December."

In the latest survey, 93 out of 103 economists expect the Federal Reserve to cut rates by 25 basis points at the meeting on December 17-18. Only 10 economists believe that rates will remain unchanged. The pricing in the interest rate futures market also almost fully reflects this rate cut expectation.

The survey indicates that at the policy meeting on January 28-29, most economists (58 out of 99) expect the Federal Reserve to hold steady. This is just a week after Trump returns to the White House. The Federal Reserve has cut rates by a total of 75 basis points since September and may take a wait-and-see approach in the short term.

The future policy path remains uncertain. Bank of America economist Stephen Juneau stated, "The Federal Reserve will wait to see how things develop next year, observing which policies are truly implemented and which are merely mentioned as risks."

The current goal of the Federal Reserve is to adjust the federal funds rate to a "neutral level," which is a rate that neither stimulates nor suppresses the economy. According to the Federal Reserve's latest assessment, the neutral rate is about 2.9%. Federal Reserve Chairman Jerome Powell recently stated that, given the strong economic performance and inflation exceeding September expectations, policymakers can be "a bit more cautious" in finding the appropriate neutral level.

About 60% of economists (56 out of 97) expect that by the end of 2025, the Federal Reserve will cut rates at least three more times, each by 25 basis points, bringing the rate down to 3.50%-3.75% or lower. However, this proportion has decreased from over 90% in October and over 70% in November. Miller from Barclays pointed out that next year, disagreements regarding the appropriateness of monetary policy and estimates of the neutral policy rate may intensify.

At the same time, the trade policies of the Trump administration may keep core inflation elevated. Nomura chief economist David Choi stated, "In the medium term, higher tariffs and supply chain disruptions could push core inflation above 3% by mid-2025."

The annualized growth rate of the U.S. economy last quarter was 2.8%, and it is expected to grow by 2.1% in 2025 and 2% in 2026. This growth rate is higher than the 1.8% non-inflationary growth level currently believed by Federal Reserve officials Inflation expectations are also being raised. Surveys show that 75% of economists believe there is a high risk of inflation rising again in the U.S. economy next year. David Seif pointed out, "The aggressive trade policies of the Trump administration could lead to core inflation significantly above 3% by 2025."

The Federal Reserve will release its latest quarterly economic forecasts at the December meeting, which may provide clearer signals for future policy directions