US Fed to trim rates twice more this year

BENGALURU, Oct 21 (Reuters): The Federal Reserve will lower its key interest rate by 25 basis points next week and again in December, according to a Reuters poll of economists who remain deeply divided on where rates will be by the end of next year.

A month ago, economists had expected just one more cut this year. But the new forecast follows a recent shift in expectations by Fed policymakers toward additional reductions.

Caught between the dual risks of already-elevated inflation climbing higher due to tariffs and a further weakening of the labor market, the Fed appears to have prioritized the latter, prompting it to cut rates by 25 basis points last month for the first time since December.

All but two economists, 115 of 117, predicted the Fed would lower the interest rate again by a quarter point to 3.75 per cent-4.00 per cent on October 29. Two expected a 25 bps cut in October and a 50 bps cut in December.

That majority falls to 71 per cent for another cut in December. The poll was conducted on October 15-21.

Financial market traders are more convinced, and have fully priced in two more reductions this year to interest rate futures contracts. Many Federal Open Market Committee members, including Fed Chair Jerome Powell, have suggested they will keep focusing on the job market.

However, a government shutdown that so far has lasted three weeks has delayed key official data on employment as well as inflation, blurring the economic outlook.