The U.S. Federal Reserve is expected to hold off on further rate cuts until next quarter due to rising inflation concerns, according to a Reuters poll of economists. Previously, many had anticipated a cut in March.
Since President Donald Trump’s election, economists have revised inflation forecasts upward, citing worries that his policies—particularly tariffs—could drive up prices.
After cutting rates by 100 basis points between September and December, Fed officials, including Chair Jerome Powell, have signaled they are in no rush to lower rates further. With a robust job market and strong consumer spending, many believe the economy remains stable, reducing the urgency for additional cuts.
Trump recently announced a 25% tariff on all steel and aluminum imports. While tariffs on Mexico and Canada have been delayed until March 1, an additional 10% tariff on Chinese imports has already been imposed.
“The tariffs are inflationary and could be quite negative for economic growth as well. That uncertainty just means the Fed is sort of left waiting and wanting to see what actually does happen,” said James Knightley, chief international economist at ING.
A February 4-10 poll found that while economists were previously expecting a March rate cut, opinions are now split. A two-thirds majority (67 of 101) anticipate at least one cut by June, with 22 expecting it in March and 45 in the second quarter. Only 17 believe the next cut will happen in the second half of 2025, while 16 predict no cuts this year.
Over 90% of economists have raised their 2025 inflation forecasts, with nearly 60% citing increased risks from tariffs.
“The uncertainty is likely enough to keep Fed officials on the sidelines over the coming months,” said Neil Shearing, chief economist at Capital Economics.
Despite these concerns, the U.S. economy is projected to grow 2.2% in 2025, with unemployment reaching 4.2% this year.