100 Economists Expect Fed to Raise Rates in December After Holding Them Steady in October
Key Facts
The 100 economists who took part in a Reuters poll expected the U.S. Federal Reserve to raise interest rates in December, while 94 expected it to hold them at a range of 3.75%–4.00% at the October 27–28 meeting. The poll was conducted between October 16 and 20, according to a Reuters report published on October 20. The shift from the previous month's poll, when fewer than half of participants expected a December increase, signals a change in economists' assessments of the monetary policy path. These projections remain the participants' views, while the decision rests with the Federal Open Market Committee. The consensus for a December increase follows the Fed's quarter-percentage-point rate hike in September.
At its September 15–16 meeting, the committee approved a quarter-percentage-point increase, with a 12-0 vote, to the current range of 3.75%–4.00%. The Fed said "economic activity has been expanding at a solid pace" and that domestic spending had remained resilient amid continuing uncertainty related in part to geopolitical developments. Economists' projections differed on what would follow the December move: about 60% of forecasters saw rates peaking at a range of 4.00%–4.25%. By contrast, 38 of 92 forecasters expected at least two further increases. The divergence highlights that expectations for a December hike do not imply similar agreement on the number of increases or the ultimate level of rates.
Inflation expectations remain a central factor in this path: the median poll forecast showed personal consumption expenditures inflation, the Fed's preferred measure, staying more than 100 basis points above the bank's 2% target over the coming quarters. Participants did not expect the measure to return to target before at least 2028. In Bureau of Labor Statistics data, core consumer prices, excluding food and energy, rose 2.6% in the 12 months through September, compared with a 2.4% increase in the period through August. The Associated Press also reported that core prices rose 0.3% from August to September, a pace the agency described as elevated if sustained. These figures distinguish the consumer price index from the personal consumption expenditures measure covered by the Reuters poll.
On growth, the Fed raised its median projections for real gross domestic product growth to 2.3% in 2026 and 2.4% in 2027, from 2.2% and 2.3% in its June projections. The median estimate of the appropriate rate path was 4.1% at the end of 2026. The Reuters poll, meanwhile, projected U.S. growth at an annualized rate of 3.2% in the third quarter, slowing to 2.2% in the fourth quarter, followed by annual growth of 2.3% in 2026 and 2.1% in 2027. These estimates depict an economy continuing to grow alongside inflation that has not returned to the bank's target. The minutes of the September meeting also said activity data showed a resilient economy and persistent inflation, and that rising geopolitical tensions had pushed energy prices higher between meetings.
In the bond market, longer-dated Treasury yields surged to their highest levels in decades on October 7, before falling about 25 basis points as the prospect of a rate increase at the October meeting receded, according to Reuters via Kitco. The move came as market expectations shifted over the timing of the next step, while the economists' poll alone does not settle the path of yields. Fed Chair Kevin Warsh said the bank had made clear its commitment to price stability, adding: "I don't prejudge meetings." The Associated Press reported from the latest meeting's minutes that most Fed officials saw another rate increase as potentially necessary during the year. That aligns with the poll's expectations for a December hike, while the decision remains subject to the committee's assessment of the data.
Attention turns first to the Fed's October 27–28 meeting, then to the September income and spending report, due on October 29 at 8:30 a.m. Eastern Time. The October jobs report is due on November 6 at the same time, followed by that month's consumer price report on November 10. The minutes of the October meeting are scheduled for release on November 18, ahead of the next meeting on December 8–9. These successive releases will give the committee new data on inflation and the labor market before the December meeting. The 100 economists in the Reuters poll had expected a rate increase at that meeting, without specifying its size.