As is known, there has been a change in leadership at the Fed, with Kevin Warsh replacing Jerome Powell. The first Fed meeting under Kevin Warsh’s leadership left interest rates unchanged in June, as expected.
For now, the focus is on how the Fed will behave for the remainder of 2026 under Kevin Warsh’s leadership, and the latest research reveals current expectations.
Most economists in a Reuters poll do not expect interest rates to rise or fall in the remaining six months of the year.
According to the survey, the Fed is expected to keep interest rates between 3.50% and 3.75% through the end of 2026. This marks a big change from a survey conducted earlier this month, which predicted a rate cut.
Indeed, in a separate Reuters poll in May, 32% expected a 25 basis point rate cut, but that figure had fallen to 22% before June’s rate decision. In the latest poll conducted after the Fed meeting, that number fell further to 7%.
The results also show that for the first time since 2023, the number of economists expecting a rate hike exceeds the number of economists expecting a rate cut.
Josh Hart, senior economist at Vanguard, who participated in the study, said the most appropriate approach is to keep interest rates at current levels rather than raise them. Hart noted that Fed members are split down the middle.
Deutsche Bank said in its latest report that the decline in PCE data has lowered expectations for Fed rate hikes.
Deutsche Bank, one of Germany’s largest banks, said yesterday that expectations for a Fed rate hike were lower after the personal consumption expenditure (PCE) price index rose 0.4% month-on-month, below the 0.5% expected by economists.
Analysts at Deutsche Bank added that the data helped soften the Fed’s interest rate hike momentum, which has gained momentum in recent weeks.
He also added that Fed officials remain cautious about the outlook for inflation.
*This is not investment advice.
