- Gold prices surged 3% after Reuters poll indicated Fed may keep rates steady through 2026
- Most economists expect the Fed to hold rates at 3.50%-3.75% in September and year-end
- 70% of economists predict no rate change in September, down from 90% in August
Gold surged around 3% after a fresh Reuters poll showed that a majority of economists expect the US Federal Reserve to keep interest rates unchanged for the rest of 2026, easing concerns of an imminent rate-hike cycle.
The Fed is widely expected to leave its benchmark interest rate unchanged at its September 15-16 meeting and maintain the current 3.50%-3.75% range through the end of the year, according to the Reuters poll conducted between September 4 and 9.
However, expectations have become less certain. Around 70%, or 65 of 93 economists, expect rates to remain unchanged next week, down sharply from 90% in August. The remaining respondents expect a 25-basis-point increase, the first such hike since July 2023.
For the full year, 56%, or 52 economists, expect rates to stay unchanged. That compares with 80% in recent polls. The proportion expecting at least one hike has more than doubled from last month, Reuters reported.
The shift comes as US economic data has remained relatively strong and inflation continues to run above the Fed's 2% target. Economists are now closely watching the August Consumer Price Index data, due Friday, for clues on the central bank's next move.
"If everything plays out as we're expecting, then they'll stay on hold next week. But if there's an upside surprise on the inflation data, they're not going to wait around. They're likely to start a hiking cycle," Eli Nir, US economist at TD Securities, told Reuters.
Fed policymakers themselves remain divided. At the July 28-29 meeting, three officials backed a rate increase. Fed Chairman Kevin Warsh's hawkish remarks at the Jackson Hole symposium last month have also strengthened expectations of tighter policy.
Rising crude oil prices, with futures moving above $100 a barrel amid renewed Middle East tensions, have added to inflation concerns. Markets are now pricing in two rate hikes by March, while the two-year Treasury yield has climbed about 20 basis points since Warsh's Jackson Hole speech.
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Stephen Stanley, chief US economist at Santander, said a hike this month appeared probable unless Friday's CPI report delivers a substantial downside surprise.
Economists expect annual PCE inflation at 3.5% this year and 2.4% in 2027, with inflation unlikely to return to the Fed's 2% target before 2028, Reuters reported.
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