Expectations for Two Interest Rate Cuts from the Fed Strengthen in 2026

Economists Expect Two Rate Cuts from the Fed

Economists are forecasting that the Federal Reserve (Fed) will make two rate cuts in 2026. This expectation emerged from a survey conducted by Bloomberg.

Disruptions in the Labor Market

According to the economists participating in the survey, Fed officials will vote to lower interest rates next week in response to potential sharp disruptions in the labor market. Participants expect the U.S. central bank to implement two quarter-point cuts starting in March 2026.

Recent Developments and Economic Outlook

This anticipated cut will follow reductions in September and October. The vast majority of economists expect Fed officials to reiterate that the downside risks to the labor market have increased.

The Fed will announce its interest rate decision on December 10. Policymakers hold opposing views on the balance of risks between their mandates for price stability and full employment. Some regional Fed presidents express concerns that inflation will continue, while others argue that a new rate cut is necessary to support the labor market.

What Do Recent Economic Data Indicate?

Since the last meeting, the released economic data has increased uncertainty. Major companies like Verizon Communications and Amazon.com have announced significant layoffs. However, weekly applications for unemployment insurance remain at low levels.

According to the survey results, only 18% of participants view inflation as a greater risk. The survey was conducted among 41 economists between November 28 - December 3.

Future Projections

The Fed will disclose a new set of economic projections at next week's meeting. Some participants expect the Fed to revise its 2026 economic growth forecasts upward and its inflation forecasts downward. Additionally, it's noted that there may be an upward revision for the unemployment forecast for 2026.