The Federal Reserve is widely expected to leave interest rates unchanged at its October policy meeting before introducing another rate hike in December, according to a Reuters survey published on Tuesday.
The poll, conducted between October 16 and 20, revealed overwhelming support among economists for a temporary pause in monetary tightening. However, expectations for another increase before the end of 2026 have strengthened significantly.
Of the 100 economists surveyed, 94 predicted that the Fed would maintain its benchmark interest rate within the current 3.75% to 4.00% range at its October 27-28 meeting.
Meanwhile, all 100 respondents anticipated a rate increase at the December 8-9 meeting, reflecting growing concerns about persistent inflation.
Fed Rate Hike Expectations Shift Toward December
The latest Reuters poll highlights a major change in expectations surrounding the Federal Reserve’s monetary policy outlook.
In the previous survey, fewer than half of the participating economists expected another interest rate increase in December. However, the latest results indicate a strong consensus that additional tightening is approaching.
The Federal Open Market Committee (FOMC) raised borrowing costs in September for the first time since 2023.
That decision reflected increasing concerns about inflation, particularly as rising energy prices continued to push consumer costs higher.
Despite stronger-than-expected September inflation figures, financial markets largely anticipate that policymakers will avoid another immediate increase in October.
Instead, investors expect the central bank to assess additional economic indicators before deciding whether further action is necessary.
Federal Reserve Officials Favor a Cautious Approach
Federal Reserve Chair Kevin Warsh has avoided providing specific guidance about the central bank’s upcoming interest rate decisions.
Since taking office earlier in 2026, Warsh has maintained a communication strategy that leaves policymakers greater flexibility when responding to changing economic conditions.
Meanwhile, several other Federal Reserve officials have expressed support for a patient approach.
San Francisco Fed President Mary Daly has suggested that additional monetary tightening may eventually be necessary. Nevertheless, she has indicated that an immediate rate increase is not essential.
Similarly, New York Fed President John Williams and Fed Vice Chair Philip Jefferson have emphasized the importance of examining further economic data before making another policy adjustment.
These comments have reinforced expectations that the Federal Reserve will pause in October while keeping the possibility of a December rate hike firmly on the table.
Economists See US Interest Rates Peaking Above 4%
The Reuters survey also provided insight into where economists expect US interest rates to peak during the current tightening cycle.
Nearly 60% of respondents predicted that the federal funds rate would reach a maximum range of 4.00% to 4.25%.
However, some economists warned that persistent inflation could force the Federal Reserve to raise borrowing costs more aggressively than currently anticipated.
Higher energy prices remain an important concern, particularly as they can increase transportation, manufacturing and household expenses.
Furthermore, continued inflationary pressure could make it more difficult for policymakers to achieve their price stability objectives.
What the Fed’s Interest Rate Outlook Means for Financial Markets
The possibility of another Federal Reserve rate hike has important implications for financial markets.
Higher interest rates typically increase borrowing costs for businesses and households. They can also influence US Treasury yields, stock valuations and demand for risk-sensitive assets.
Technology stocks and other growth-oriented investments may face additional pressure if borrowing costs remain elevated for longer than investors anticipate.
Meanwhile, the US dollar could benefit from expectations of tighter monetary policy, although currency movements will also depend on broader economic conditions and investor sentiment.
Ultimately, the Federal Reserve’s October decision and subsequent economic data will help determine whether policymakers proceed with another interest rate increase in December.
For now, economists overwhelmingly expect a short-term pause rather than an end to the Fed’s monetary tightening cycle.
