A majority of economists are betting the U.S. Federal Reserve will reduce its key interest rate by a quarter percentage point at the December 9–10 policy meeting, even as divisions persist among policymakers over whether the world’s largest economy truly needs further easing.
According to a Reuters poll of 108 economists conducted from November 28 to December 4, 2025, 82% of respondents forecast a 25-basis-point cut next week. This consensus mirrors November predictions and aligns with the near-85% probability implied by rate futures, but contrasts sharply with ongoing splits within the Federal Open Market Committee (FOMC).
Following a 25-basis-point cut in October, Fed Chair Jerome Powell cautioned against reigniting inflation and emphasised that a December rate reduction was far from guaranteed. Inflation has remained above the Fed’s 2% target since March 2021, while a 43-day government shutdown disrupted key economic data, complicating policy decisions. Minutes from the October FOMC meeting revealed sharp divisions: some members preferred to hold rates steady, while several opposed the previous cut outright.
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Despite internal Fed disagreements, many economists believe the December cut is likely.
“I expect the Fed will cut at the meeting next week. While there’s been back and forth, especially after October, with Powell appearing somewhat hawkish, that was largely due to missing data from the shutdown,” said Thomas Simons, Chief U.S. Economist at Jefferies. “Since then, public comments from Board of Governors members show broad support for continued cuts.”
Supporters include New York Fed President John Williams, along with Governors Michelle Bowman, Christopher Waller, and Stephen Miran, who argue that rates can be lowered without endangering the inflation target and provide a buffer against further labour market weakness. However, up to five of the 12 voting members have publicly opposed additional easing.
Inflation Expectations Remain Divided
Forecasts for 2026 reflect continued uncertainty. Median projections point to two additional cuts, potentially bringing the federal funds rate to 3.00–3.25% by year-end, but no clear consensus exists on the timing or magnitude.
Factors complicating decisions include:
- Fiscal concerns from the administration’s tax-cut and spending package
- Tariff-related price pressures
- Questions over the central bank’s independence
“Reflationary forces, persistent goods price stickiness, and fiscal policy constraints will keep the Fed restricted in its actions next year,” said Kevin Gordon, Head of Macro Research at Schwab Center for Financial Research.
Conflicting signals from FOMC members have accelerated hedging flows in financial markets as investors seek protection against policy uncertainty. Inflation expectations also diverge: University of Michigan consumer surveys place expectations near 4%, while market-implied gauges such as breakevens and TIPS remain lower.
READ ALSO: Fed Set to Cut Rate Again Amid Cooling Job Market, Inflation Slowdown
Poll medians indicate the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation measure, is projected to stay above 2% through 2027.
The U.S. economy likely grew 3.0% in Q3, slowing to 0.8% in the current quarter, with annual averages predicted around 2.0% for 2025 and 2026. These mixed signals moderate growth, persistent inflation, and a cooling labor market leave the Fed navigating a delicate balance as it decides whether to ease rates further.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
