US Fed to trim rates twice more this year; 2026 rate path very unclear

Core Viewpoint - The Federal Reserve is expected to lower its key interest rate by 25 basis points next week and again in December, reflecting a shift in expectations among economists regarding monetary policy adjustments [1][2]. Interest Rate Predictions - A Reuters poll indicates that 115 out of 117 economists predict a rate cut to 3.75%-4.00% on October 29, with two economists forecasting a 25 basis points cut in October and a 50 basis points cut in December [2][3]. - The likelihood of another cut in December is estimated at 71%, showing a consensus among economists [3]. Economic Conditions - The Federal Reserve is balancing the risks of elevated inflation and a weakening labor market, with a recent rate cut being the first since December [2][4]. - A government shutdown has delayed key employment and inflation data, complicating the economic outlook [4]. Labor Market Insights - Current private-sector data suggest modest layoffs and hiring, indicating stability in the job market without significant changes [5]. - Economists are divided on whether the job slowdown is due to labor demand or supply issues, which affects monetary policy responses [5]. Inflation and Unemployment Forecasts - The unemployment rate is expected to average around 4.3% through 2027, remaining largely unchanged [6]. - Inflation is projected to average above the Fed's 2% target through 2027, with consumer inflation anticipated to rise to 3.1% from 2.9% in August [6]. Future Rate Speculations - Economists are divided on future interest rates, with predictions ranging from 2.25%-2.50% to 3.75%-4.00% by the end of next year, influenced by speculation on the next Fed chair after Powell's term ends in May [7].