The U.S. Federal Reserve will reduce its key interest rate by a quarter-percentage point at the December 9-10 policy meeting to support a cooling labor market, according to a majority of over 100 economists surveyed by Reuters.

That strong consensus broadly mirrored a November poll and the near-85% chance of a cut implied by rate futures but was in sharp contrast to the growing division among policymakers over whether the world’s largest economy needs another dose of easing next week.

Following a 25-basis-point cut in October, Fed Chair Jerome Powell cautioned against inflation reigniting and stressed a December move was far from a “foregone conclusion.” Inflation has stayed above the Fed’s 2% target since March 2021.

A 43-day government shutdown that stalled key economic data releases added to that concern.

Minutes from the October meeting also revealed a sharply split Federal Open Market Committee – some members preferred to keep rates unchanged, several outright opposed the cut.

Despite disagreements over both that decision and the path ahead, a markedly large 82% majority, 89 of 108 economists in the November 28-December 4 Reuters poll, predicted a 25-bps reduction.

“I’m expecting the Fed will cut at the meeting next week. I know there’s been a lot of back and forth especially after October about Powell being somewhat hawkish, but that, I think, was more about a lack of available data due to the shutdown,” said Thomas Simons, chief U.S. economist at Jefferies.

“While it makes sense why he would be concerned, he can’t necessarily make the same argument again in December. We’ve seen enough support for continued cuts from most of the Board of Governors in their public comments since that meeting.”

New York Fed President John Williams recently joined Fed Governors Michelle Bowman, Christopher Waller and Stephen Miran in the rate cut camp. Williams said rates could be lowered without jeopardising the inflation goal and would offer insurance against further labour market slippage.

But as many as five of the 12 voting members have publicly voiced opposition to cutting rates further.

Survey forecasts for 2026 reflected that lack of consensus. While medians pointed to two additional cuts bringing the federal funds rate to 3.00-3.25% by year-end, there was no clear majority on any quarter.

Fiscal worries from the administration’s sweeping tax-cut and spending bill, tariff uncertainties and concerns about the central bank’s independence were key reasons.

“Some of the reflationary forces at play, whether it’s on the fiscal side with the ‘big beautiful bill’ or the persistent stickiness in goods prices driven by tariffs – that’s going to keep the Fed a bit restricted in what they can do next year,” said Kevin Gordon, head of macro research and strategy for the Schwab Center for Financial Research.

Conflicting signals from FOMC members on the timing and magnitude of future easing have also recently accelerated hedging flows in financial markets, pushing investors to seek protection against policy uncertainty.

A stark gap also exists in inflation expectations: University of Michigan consumer surveys see it near 4%, while market-implied gauges such as breakevens and Treasury Inflation-Protected Securities sit far lower.

“There is a bit of a disconnect there, so that’s another thing the Fed has to keep in mind. How people view inflation is still, in many ways, the number one problem with affordability being the key operative word,” Schwab’s Gordon added.

Poll medians showed the Personal Consumption Expenditures index – the Fed’s preferred inflation measure – running above 2% through 2027.

The U.S. economy likely expanded 3.0% in Q3, slowing to 0.8% this quarter. It was predicted to average 2.0% this year and in 2026.