Cut Prospects Shift: Fed Expected to Hold Interest Rates in January
Market sentiment is increasingly unanimous: the Fed is expected to hold interest rates in January. A Reuters survey published Wednesday showed that nearly all economists believe the US central bank will hold interest rates at its January 27-28 meeting, amid a still-strong economy and subdued inflation.
Of the 100 economists surveyed, all expect the federal funds rate to remain in the 3.50%-3.75% range. In fact, 58% of respondents believe there will be no change in interest rates throughout the first quarter. This represents a shift in sentiment compared to the December survey, when many markets still expected a cut as early as March.
The reason is simple: economic growth remains solid, while inflation remains above the Fed's 2% target. This combination narrows the window for a swift rate cut—at least in the short term. However, a majority of economists still see the possibility of a rate cut in the second half of the year, with at least two more before the year ends.
What remains unclear is the timing beyond the first quarter. Uncertainty remains high, but a narrow majority—55 out of 100 economists—expect further cuts to be made in June or later, close to the end of Jerome Powell's term as Fed Chair in May.
The same survey also showed a slight uptick in optimism about the US economy. The latest projections put US growth at 2.3% in 2026 and 2.0% in 2027, after an estimate of 2.2% in 2025. These figures are slightly stronger than the December survey's estimates, reinforcing the idea that the Fed has reason to be more patient before changing policy direction.
Source: Newsmaker.id
