Fed to trim rates twice more this year; 2026 rate path very unclear

— The US Federal Reserve will lower its key interest rate by 25 basis points (bps) next week and again in December, according to a Reuters poll of economists who remain deeply divided on where rates will be by the end of next year.

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A month ago, economists had expected just one more cut this year. But the new forecast follows a recent shift in expectations by Fed policymakers toward additional reductions.

Caught between the dual risks of already-elevated inflation climbing higher due to tariffs and a further weakening of the labor market, the Fed appears to have prioritized the latter, prompting it to cut rates by 25 bps last month for the first time since December.

All but two economists, 115 of 117, predicted the Fed would lower the interest rate again by aquarter point to 3.75%-4% on Oct. 29. Two expected a 25-bp cut in October and a 50-bp cut in December.