Bloomberg Survey: Economists Raise U.S. Core PCE Forecast to 3.2%, Rate Cut Expectations Pushed Back to June 2027
Miles Bennett
A Bloomberg survey of 86 economists lifts the U.S. core PCE forecast to 3.2% and delays the first rate cut to June 2027 — the high-rate regime will last longer than markets had priced, making it the defining constraint for asset valuations in the second half.
How stubborn is inflation?
Core PCE — prices excluding food and energy — is now forecast at 3.2% year-on-year for Q4; headline inflation holds at 3.5%.
This means → both readings sit well above the Fed's 2% target; inflation is nowhere near "mission accomplished."
Oil prices eased after a provisional U.S.–Iran deal, but economists broadly agree the energy shock is still feeding through supply chains, keeping near-term inflation pressure alive.
Why has the rate cut been pushed to 2027?
The survey median shows the Fed holding rates steady until June 2027 before cutting.
In plain terms = the "rate cut this year" window the market once expected is now shut. Some economists even see a possible rate hike before year-end.
This reflects a core judgment: as long as inflation stays far above target, the Fed has no reason to cut.
What role does the labor market play?
Surveyed economists lowered unemployment forecasts for the rest of this year and raised job-growth estimates.
This means → a still-strong labor market gives the Fed room to stand pat — holding rates high won't tip the economy into recession.
In plain terms = the stronger the jobs picture, the less urgency the Fed feels to cut; policy stays focused on fighting inflation.
What about economic growth?
Economists raised their Q2 GDP forecast, but full-year 2026 GDP growth still averages 2.1%.
This means → near-term momentum is decent, but the longer high rates persist, the more they weigh on full-year growth.
What does this mean for investors?
The survey was conducted after Fed Chair Kevin Warsh's first press conference, capturing market consensus under the latest policy signals.
The sharp delay in rate-cut expectations means the high-rate environment will last considerably longer — this becomes the central constraint variable for equities, bonds, and real estate pricing in the second half.
Put simply = don't count on cheap money returning soon; asset valuations need to be re-run under a "higher for longer" assumption.
Content is for reference only, not financial advice.