Fed Holds Rates Steady Amid Strong Economy; Rate Cuts Unlikely Before Powell's Term Ends - Reuters Survey

The Federal Reserve is expected to keep interest rates unchanged through the first quarter of 2026, with no rate cuts likely before Chair Jerome Powell’s term expires in May, according to a Reuters survey of 100 economists conducted January 16–21. The shift from prior expectations of a March cut reflects resilient economic growth and persistent inflation above the Fed’s 2% target. Economists cited robust GDP growth—4.3% annualized in Q3 2025 and a median 2026 forecast of 2.3%, up from 2.0% last month—as justification for higher-for-longer rates. The fed funds rate is projected to remain in the 3.50%-3.75% range after the January 27–28 meeting, with 58% of respondents expecting no change until at least June. Fifty-five economists anticipate rate cuts could resume after Powell’s term ends, but political pressures loom. Former President Trump has criticized Powell, the Justice Department has threatened criminal probes over Fed headquarters renovations, and litigation continues over Trump’s attempt to remove Governor Lisa Cook. Core PCE inflation is expected to stay above 2% through 2028, limiting near-term easing. AI investment and fiscal spending may prolong inflationary pressures, prompting cautious policy normalization even if cuts begin later in 2026.