The Federal Reserve is still expected to cut interest rates this year — but not until the fall — as policymakers weigh the fallout from President Trump’s tariffs on trade partners, according to a survey released Friday.
Economist polled by Bloomberg News forecast two quarter-point reductions, with the first expected in September and the second in December, the outlet reported.
Fed officials will hold their two-day meeting next week and are expected to keep the benchmark interest rate unchanged, between 4.25% and 4.5%.
According to the poll, the majority of economists see a higher risk of inflation and unemployment due to the current trade turmoil.
About 70% of respondents surveyed expect weaker growth in 2025 due to Trump’s policies, with two-thirds forecasting higher inflation.
The poll was carried out between March 7 and 12.
The Fed’s latest monetary policy meeting comes as Wall Street is increasingly worried about an economic slowdown, with concerns exacerbated by Trump ramping up his tariff war.
A weeks-long slide in stocks accelerated in recent days with the benchmark S&P 500 on Thursday confirming it was in a correction, ending down over 10% from its February 19 record high. The decline has wiped off more than $4 trillion in market value, with some of Wall Street’s highest fliers such as Nvidia and Tesla getting pummeled.
“The stock market is trying to get any type of insight as to when the Fed will be comfortable enough to implement their next rate cut,” said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth. “I don’t think the onslaught of headlines and new policies coming from the White House is going to stop anytime soon.”
This uncertainty has caused volatility in financial markets and raised concerns of a potential economic slowdown, while inflation remains high — a scenario economists call stagflation.
“The Fed is in a very tough spot right now, facing a more stagflationary outlook even as core inflation remains well above its medium-term target,” said Scott Anderson, chief US economist at BMO Capital Markets told Bloomberg.
“Uncertainty around the magnitude, duration, and targets of future tariffs further complicates the monetary policy outlook,” he added.
Tariff news is still likely to be at the forefront for markets in the coming week, with analysts saying the levies could bite into corporate profits and drive up consumer prices.
In the latest salvo, Trump on Thursday threatened a 200% tariff on all wines and other alcoholic products from Europe. A day earlier, the European Commission said it will impose counter tariffs on $28 billion worth of US goods in response to blanket US tariffs on steel and aluminum.
There are also concerns on Wall Street that the uncertainty could upend the recent deal-making boom, or Trump “bump,” as M&A activity starts to slow.
But Powell dismissed warnings of a downward turn earlier this month, saying: “The economy’s fine. It doesn’t need us to do anything, really, and so we can wait and we should wait.
With Post wires
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