Reuters Poll: Fed to Hold Steady This Year as Rate Hike Probability Reverses to "High"
Alina Collins
A Reuters poll of 104 economists shows the Fed will hold rates at 3.50%–3.75% this year, yet 66% of respondents now call a rate hike 'likely' — up from a majority who said 'unlikely' just last month, marking a sharp consensus reversal toward potential tightening.
All 104 say "hold" — so why are hike expectations rising?
All 104 economists expect rates unchanged at the July 28–29 meeting. Zero near-term dissent.
Yet among the 67 who answered a separate question on hike probability, 44 (roughly 66%) rated the chance of a hike this year as "high."
This means → The consensus is not "hold forever" but "hold for now — and the threshold for action is dropping fast." Last month, 47 of 86 respondents said the probability was "low." The collective judgment flipped in a single month.
Why won't inflation come down?
The Fed's preferred gauge — PCE, or personal consumption expenditures price index — read 4.1% in May, double the 2% target, and has stayed above target for more than five consecutive years.
A fresh escalation in the Middle East has pushed oil prices up roughly 25% in recent weeks, casting doubt on last month's brief cooling trend.
In plain terms = Prices have overshot the target for five straight years, and now oil is adding another wave. The Fed's room to "wait and see" is shrinking.
What does Warsh actually want — to buy time, or to lay the groundwork for a hike?
Fed Chair Kevin Warsh reiterated last week that bringing inflation back to target is the top priority, but gave no clear signal on the path.
Nomura senior U.S. economist Jeremy Schwartz argues Warsh leans toward "buying time with words" — building policy credibility through rhetoric rather than genuinely tilting toward a hike. Schwartz: "The areas Warsh is focused on look more like building a case for holding steady."
Société Générale chief U.S. economist Jan Groen takes the opposite view: if the Fed is serious about 2%, "the timing of a hike is, in some sense, approaching." He adds that the past two to three years of "holding steady to slowly cool demand" has "essentially failed."
Is Warsh building a narrative to hold — or paving the way to tighten?
BULL
Room to keep waiting
Unemployment steady at 4.2%, growth around 2% — holding won't break anything immediately.
Words before action
Schwartz's read: Warsh is stockpiling reasons to hold, not setting up a hike.
BEAR
Five years of misses means the strategy failed
Groen says the hold-and-wait approach has essentially failed; hike timing is approaching.
Oil resets the inflation baseline
A 25% oil-price jump may make last month's cooling a one-off.
In plain terms = both sides have a point — the economic data can still take the weight, but five years of missing the target is itself the strongest argument for moving.
What is the market pricing in?
Markets currently price in two rate hikes before March next year.
The poll median shows rates on hold through 2028, while PCE inflation is expected to stay above target over the same period.
This means → The economists' median says "hold," but the market is already pricing hikes — the two signals point in opposite directions, which tells you that uncertainty itself is the most certain conclusion right now.
Could political pressure force a hike?
President Trump made taming inflation a core campaign promise in 2024; persistently high living costs are becoming a political liability ahead of November's midterm elections.
JPMorgan economists note that among Warsh's five newly formed task forces, the inflation-framework group will have the deepest medium-term impact on policy, but near-term deliverables are more likely on communications and the balance sheet.
This reflects a deeper reality: the true test window is July and August inflation data. If the numbers don't improve, the "buy time" narrative gets overtaken by facts.
Content is for reference only, not financial advice.