Key takeaways
- 94 economists expect Fed rates unchanged in October
- All 100 surveyed forecast another December interest-rate hike
- Persistent inflation strengthens expectations of tighter monetary policy
The Federal Reserve is widely expected to leave interest rates unchanged at its October 27-28 meeting, but economists now overwhelmingly anticipate another increase in December as persistent inflation complicates the central bank's policy outlook.
A Reuters survey conducted October 16–20 found that 94 of 100 economists expect the Fed to maintain its benchmark interest rate at 3.75%–4.00% this month.
More strikingly, all 100 respondents forecast a December rate hike, compared with fewer than half in the previous survey. The shift highlights how dramatically expectations have changed following stronger inflation readings and renewed energy-price pressures.
Fed Rate Decision: October Pause Looks Increasingly Likely
The Federal Reserve raised interest rates by 25 basis points in September, its first increase since 2023, as policymakers responded to persistent price pressures.
Despite that move, inflation has continued to exceed the central bank's 2% target.
September's Consumer Price Index rose 3.7% annually, up from 3.4% in August. The latest CPI report showed monthly inflation accelerating to 0.6%, with rising energy costs contributing heavily.
Meanwhile, producer prices increased 6.3% annually in September, suggesting businesses are also experiencing substantial cost pressures.
Nevertheless, Fed officials appear reluctant to raise borrowing costs at consecutive meetings without reviewing additional economic data.
New York Fed President John Williams has indicated that further tightening may be necessary but sees little urgency to act immediately.
The October decision also comes shortly before November's US midterm elections, although the Fed's monetary-policy mandate remains focused on inflation and employment rather than electoral outcomes.
December Rate Hike Expectations Reach Unanimous Consensus
The December outlook has shifted considerably.
All economists surveyed by Reuters anticipate another rate increase at the December 8–9 meeting. Nearly 60% expect the policy rate to peak at 4.00%–4.25%, although others see additional tightening beyond that level.
The expectations reflect concern that inflation could remain elevated longer than policymakers previously anticipated.
Higher oil prices are an important factor. Recent increases in energy and transportation costs have reinforced concerns that inflation could spread across the broader economy.
Federal Reserve Chair Kevin Warsh has also highlighted how the AI investment boom could temporarily increase demand for capital, electricity and infrastructure before productivity improvements arrive.
The economic consequences extend beyond borrowing costs for businesses.
Higher policy rates can increase the attractiveness of interest-bearing investments and put pressure on asset valuations, particularly when Treasury yields are already elevated.
What the Fed's Next Decision Means for Bitcoin and Stocks
Financial markets may react less to the widely anticipated October pause than to the Fed's accompanying comments about December.
For Bitcoin and other cryptocurrencies, persistent rate-hike expectations can create headwinds by supporting bond yields and reducing demand for speculative investments.
Recent Bitcoin price analysis has already identified the October meeting as a significant catalyst, with investors weighing the possibility of renewed volatility.
The bond market presents another challenge. Even when the Fed pauses, longer-term yields can continue rising as investors reassess inflation and future government borrowing.
That distinction, explored in Coinpaper's examination of Treasury yields, helps explain why an unchanged benchmark rate does not guarantee easier financial conditions.
For now, the October pause appears to be the consensus outcome. The larger question is whether incoming inflation data will reinforce expectations of another December hike or force economists to reconsider their forecasts.
