• A Reuters poll shows a strong majority of economists now expect the Federal Reserve to cut its benchmark interest rate by 25 basis points at its December 10 meeting.
  • Market pricing has surged, with the probability of a December cut jumping to 89%, a dramatic reversal from earlier cautious signals.
  • Half of surveyed economists forecast further easing, predicting the federal funds rate will fall to 3.25%–3.50% in the first quarter of 2026.

A Pivot in Motion

Just weeks after Federal Reserve Chair Jerome Powell suggested a December rate cut might not be necessary, the central bank appears set to do exactly that. According to a recent Reuters poll, 89 of 108 economists now forecast a 25 basis-point reduction at the upcoming December 10 policy meeting, which would bring the target range for the federal funds rate to 3.50%–3.75%. This consensus among forecasters mirrors a seismic shift in market sentiment, where the implied probability of a cut has rocketed from around 40% earlier in the month to 89% as of early December, according to data tracked by the CME's FedWatch tool.

The swift repricing follows a series of dovish signals from Fed officials, most notably from New York Fed President John Williams, whose recent commentary was interpreted by traders as opening the door wider for near-term easing. This pivot has effectively cemented market expectations, turning what was once a possibility into the base-case scenario. The Fed's most recent action was a 25 basis-point cut in late October, bringing the target range to 3.75% to 4.00%.

Looking Beyond December

The economist survey points to a broader easing path extending into next year. Half of the 100 economists who provided a longer-term forecast predicted the Fed will cut rates again in the first quarter of 2026, lowering the target range to 3.25%–3.50%. This aligns with revised outlooks from major institutions; Bank of America, for instance, recently updated its model to include a December cut, citing the shift in market bets and Fed commentary. The bank's economists are now modeling two additional cuts in 2026, which would ultimately position the federal funds rate in a 3% to 3.25% range.

While the Fed's official statements continue to emphasize a data-dependent approach, balancing the dual mandate of maximum employment and 2 percent inflation, the direction of travel is now clear. The central bank's framework suggests it is carefully assessing incoming economic data and the evolving outlook to guide these adjustments. Attempts to reach the Federal Reserve for additional comment on the poll results were not immediately successful.

Market and Economic Implications

The anticipated easing cycle is already reverberating through financial markets. Safe-haven demand has strengthened as investors navigate volatile global conditions amid the shifting U.S. rate outlook. For consumers and businesses, the path toward lower borrowing costs promises relief, potentially easing financing for everything from mortgages to corporate expansion. The gradual, signaled approach aims to manage the transition without reigniting inflationary pressures, a delicate task the Fed's policy committee will be closely watched for in the coming months.

Correction: An earlier version of this article misstated the current federal funds target range. It is 3.75% to 4.00%, following the October cut.