A few months back, economists thought the Fed would be cutting rates by now. Now they don't see a cut until the summer of 2027. What changed so fast? Inflation that won't quit.
The New Timeline
The Fed is the US central bank, and it sets the rate that drives borrowing costs. A new survey of 35 economists sees its first cut in June 2027. A second would follow by that December.
By the end of 2027, they see the rate down to about 3% to 3.25%. That would be the floor for this cycle.
Back in March, those same experts expected cuts to start this year. That's a big swing in just three months.
Next week's meeting, on June 16-17, should be quiet. Almost everyone expects the Fed to hold its rate at 3.5% to 3.75%.
That rate touches car loans, credit cards, and mortgages. When it stays high, your debt stays pricey.
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What Flipped
The bigger story is how fast the mood changed. Back in December, more than half of economists called a weak job market the top threat. Now not one of them does.
Instead, 82% say inflation is the bigger danger. Prices rose 4.2% in May from a year earlier. That's the fastest pace in more than three years.
Even the core rate climbed. Stripping out food and gas, prices were up 2.9%.
The rise has spread across many goods, not just a few. That breadth is what the Fed fears most.
That shift is why so many expect the Fed to drop a key line next week. The Fed has been leaving a porch light on, hinting its next move would be a cut.
Most experts think that light is about to go off. About three in four expect the Fed to change or scrap the line, after it drew three "no" votes in April.
Dennis Shen, an economist in Germany, put it well. The biggest signal next week may be what the Fed stops saying, not what it does.
What To Watch
This is also the first meeting run by new Fed Chair Kevin Warsh. Most economists expect a united vote.
Doubts about whether Warsh is tough on inflation have eased. Only 6% now say he won't hit the 2% goal, down from 18% in March.
Warsh also wants to change how the Fed talks. He has said he doesn't believe in spelling out the path for rates.
One expert expects shorter Fed statements as a result. Tom Simons of Jefferies sees less detail in its outlook.
Trump has pushed for lower rates for months. He says Warsh will still decide on his own.
One group isn't buying the 2027 story: bond traders. They place those bets in futures markets, and right now they lean toward tighter policy as soon as October.
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