Fed Rate Cut Roulette: Economists Place Bets While Markets Side-Eye the Whole Table

The US-Iran conflict has lobbed a geopolitical Molotov cocktail right into the middle of the inflation cooling party. Just as the data was finally starting to chill, this war has reintroduced the very real risk of it all heating back up, effectively putting a damper on any hopes for imminent Fed rate cuts—because nothing says "transitory" like a fresh conflict in an oil-rich region.

Despite these spicy new concerns, a fresh Reuters poll suggests the cuts are still theoretically on the menu—they're just being served fashionably late, like a crypto project's mainnet launch. The surveyed economists expect the Fed to hold rates steady until at least September before maybe, possibly, implementing at least one cut later this year.

Over in the financial markets, however, traders are looking at forecasts for 2026 and having a proper degen laugh. They've completely priced out any chance of a cut that far out, while assigning about a 30% probability to a rate increase. This peak skepticism is fueled by crude oil prices, which have been pumping over 40% during the four weeks of conflict—a classic "number go up" scenario, just not the fun kind.

The economist brigade, ever the optimists, are betting this energy shock will be a short-lived blip on the radar. Their confidence persists even after recent Fed rhetoric, which has been about as dovish as a hawk. Following the decision to hold rates at 3.50%-3.75% last week, several Fed members emphasized that high inflation remains enemy number one, strongly suggesting cuts aren't just around the corner.

The Reuters poll reveals a classic economist special: widespread, glorious disagreement. Forecasts for where rates will land at the end of 2026 are all over the map, splitting participants into four distinct factions: 28 expect one cut, 37 expect two, 4 are betting on three, and 13 see no change at all—a dispersion wider than the bid-ask spread on a low-cap shitcoin.

Nearly three-quarters of the polled economists (61 of 82) predict the Fed will simply stand pat next quarter. Barclays senior US economist Jonathan Millar summed up the waiting game with the dry wit of a man who stares at charts for a living: 'It will take longer than expected for the Fed to be convinced inflation is heading back to its 2% target. We don't see that happening until September. The most likely path is the Fed waits for oil prices to settle and pushes cuts into next year.'