25 basis points: Reuters poll shows unanimous forecast for December Fed hike

All 101 economists expect interest rates to rise. In a Reuters poll conducted on 6–10 November, they unanimously forecast that the Federal Reserve (Fed) would increase rates by 25 basis points on 9 December, lifting the target range to 4.00%-4.25%.

Beyond December, however, forecasts diverge. A narrow majority of 56 of 101 economists sees that month’s increase as the last in the current cycle. At least two further rises after December are expected by the remaining 45, a group that includes more than half of the primary dealers polled.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

On a separate question, the midterm elections had not altered the medium-term inflation risk outlook for 29 of 37 economists.

Even if October inflation eases, Fed Governor Christopher Waller said on Tuesday that he would “still support a 25 basis point increase” in December. A monthly core CPI reading of around 0.3% or more could warrant a different response. In that case, he said “a stronger policy move may be needed”, adding that the Fed should consider a half-point rise.

Inflation measured by the Personal Consumption Expenditures (PCE) Price Index is expected to stay above 3% in the coming quarters, according to the poll’s median forecasts. A return to the Fed’s 2% target is not anticipated before 2028. Forecasts put average PCE inflation at 3.5% in 2026 and 2.6% in 2027, with both estimates slightly higher than last month’s.

US growth is projected to slow to an annualised 2.2% in the fourth quarter from 3.4% in the third, the poll showed. Full-year growth estimates were revised slightly upwards, to 2.4% for 2026 and 2.2% for 2027.

Fed: Key Questions Answered

Federal Reserve Policy and Its Effect on the US Dollar

Price stability and full employment are the Federal Reserve’s (Fed) two mandates. As the institution responsible for US monetary policy, it primarily uses interest rate adjustments to pursue these objectives. With inflation above its 2% target and prices climbing too rapidly, the Fed raises rates. Borrowing then becomes more expensive across the economy. Higher rates make the US a more attractive destination for international investment, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt the Fed to cut rates. This encourages borrowing but puts pressure on the Greenback.

Eight Meetings a Year: The Fed’s Policy Schedule

At eight policy meetings each year, the Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) reviews economic conditions and decides monetary policy. Twelve Fed officials attend: all seven members of the Board of Governors, the Federal Reserve Bank of New York president and four of the other eleven regional Reserve Bank presidents. Those four positions rotate, with each president serving a one-year term.

Quantitative Easing (QE): How It Affects USD

A stalled financial system may lead the Federal Reserve to use Quantitative Easing (QE) in extreme circumstances. This policy substantially expands the flow of credit. Reserved for crises or exceptionally low inflation, QE is an unconventional policy tool. The Fed favoured it during the Great Financial Crisis in 2008. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening (QT): Implications for the US Dollar

By reversing QE, quantitative tightening (QT) typically supports the US Dollar’s value. The Federal Reserve ceases bond purchases from financial institutions and, as bonds in its portfolio mature, does not reinvest the principal in new bonds.