Pantheon Macroeconomics Forecasts Fed Rate Cut to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts the Federal Reserve will cut the federal funds rate from 3.75%-4.00% to 3.125% by end of 2027, driven by consumer fatigue and a slowing labor market. The firm warns of a possible 25-basis-point rate hike in 2025 due to rising energy costs. Other Wall Street firms, including Goldman Sachs, Morningstar, and Citi, also predict rate cuts beginning in 2027.
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Wall Street Turns Dovish: Fed Expected to Cut Rates in 2027 as Consumer Fatigue and AI Impact Labor Market
A growing number of Wall Street analysts predict the Federal Reserve will shift to an easing cycle in 2027, according to a report from Caixin via Tencent Stock. Pantheon Macroeconomics forecasts the FOMC will cut the federal funds rate from 3.75%-4.00% to 3.125% by end-2027, driven by consumer fatigue as pandemic-era savings and tax refunds fade, particularly pressuring low-income households. However, Pantheon warns of a possible 25-basis-point rate hike in 2025 due to energy-driven core goods inflation. Goldman Sachs expects the Fed's final hike in October 2025, contingent on falling oil prices. Morningstar projects two rate cuts in the second half of 2027, with the rate falling to 2.50%-2.75% by 2028. Citi anticipates the Fed holding rates through late 2025 and resuming cuts in June 2027. The article also notes that AI is increasingly dampening labor demand in sectors like information, finance, and professional services, with job growth potentially as low as 25,000 per month after revisions. Historically, the average gap between the last rate hike and first cut is six months, and the report suggests that Fed Chair Warsh, appointed by a pro-rate-cut president, may facilitate consensus on easing as fiscal stimulus wanes.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. This prediction comes despite a near-term risk of a 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion, as strong household spending in 2025 was fueled by large tax refunds and rising stock prices, cash that has largely been spent or used for debt repayment. Pantheon expects spending growth to slow significantly in late 2026 and early 2027 as refund support fades and low-income households face balance sheet pressure, compounded by tighter Medicaid and SNAP eligibility in 2027. Core PCE inflation is seen as stable until late 2026, then making progress toward the 2% target in the first half of 2027 as tariff and energy price effects drop out of year-over-year comparisons. Labor market trends also support easing, with job growth slowing to a trend of about 75,000 per month (potentially 25,000 after revisions) and AI-related drag on labor demand accumulating. Pantheon notes that historically, the Fed's pivot from the last rate hike to the first cut averages six months, and that consensus for cuts should build in 2027 given a president-appointed Fed chair pushing for lower rates and a non-supportive fiscal policy.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing next year, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the pivot is consumer exhaustion: Pantheon reports that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing: Pantheon notes that employment growth has slowed to a trend pace of about 75,000 per month in initial estimates—likely closer to 25,000 after revisions—while AI's negative impact on labor demand is accumulating, especially in information, finance, and professional services. Historically, Pantheon observes, the Fed's pivot from the last rate hike to the first cut has averaged just six months over the past 40 years. The report also notes that Fed Chair Warsh was appointed by a president pushing for lower rates, and that fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
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Pantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing next year, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast comes despite a near-term risk of another 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon notes that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing: job growth has slowed to a trend pace of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon also notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut in the past 40 years. The report adds that Fed Chairman Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus should make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Macroeconomics Forecasts Fed Rate Cut to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics predicts the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that a further 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the pivot is consumer exhaustion: strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing, with job growth slowing to a trend of about 75,000 per month in initial estimates—potentially closer to 25,000 after revisions—while AI's negative impact on labor demand accumulates, especially in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut in the past 40 years. The report also cites that Fed Chair Warsh was appointed by a president pushing for lower rates, and that fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Macroeconomics Forecasts Fed Rate Cut to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics predicts the Federal Reserve will shift to aggressive policy easing, cutting the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027, even as a 25-basis-point rate hike remains a near-term risk due to rising energy costs pushing up core goods prices. The forecast hinges on consumer fatigue: strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain largely unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further support easing: employment growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly closer to 25,000, while AI's negative impact on labor demand is accumulating, especially in information, finance, and professional services. Pantheon notes that historically, the Fed's pivot has been swift, with an average of just six months between the last rate hike and first cut over the past 40 years. Fed Chair Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus are expected to make consensus for rate cuts easier by 2027.
Read sourcePantheon Macroeconomics Forecasts Fed Rate Cuts to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics predicts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast comes despite a near-term risk of another 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon notes that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain largely unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further support the case for easing: job growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon also notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut over the past 40 years. The report adds that Fed Chair nominee Kevin Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus will make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. This prediction comes despite a near-term risk of another 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon notes that strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is projected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing: job growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon also notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut over the past 40 years.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will pivot to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The prediction comes despite a near-term risk of one more 25-basis-point rate hike this year, driven by rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon notes that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income families will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing: Pantheon estimates monthly job growth has slowed to around 75,000 in preliminary data, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon also notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut over the past 40 years. The report adds that Fed Chair nominee Bessent, appointed by a president pushing for lower rates, and the fading of fiscal stimulus will make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Macroeconomics Forecasts Fed Rate Cut to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics predicts the Federal Reserve will pivot to aggressive policy easing, cutting the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that a further 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer fatigue: strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further support the case for easing, with job growth slowing to a trend of about 75,000 per month in initial estimates—potentially closer to 25,000 after revisions—while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and first cut in the past 40 years. The report also cites that Fed Chair Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus will make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon reports that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheet pressures intensify, spending growth should slow markedly in Q4 2026 and Q1 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further strengthen the case for easing: employment growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly closer to 25,000, while AI's adverse effects on labor demand are accumulating, especially in information, finance, and professional services. Pantheon notes that historically, the Fed's pivot has been swift: the average interval between the last rate hike and first cut in the past 40 years is just six months. Fed Chair Warsh, appointed by a president pushing for lower rates, and the absence of fiscal stimulus supporting GDP growth should make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing next year, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon argues that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income households will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends reinforce the case for easing: Pantheon notes that employment growth has slowed to a trend pace of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is accumulating negative effects on labor demand, especially in information, finance, and professional services. Pantheon also observes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last rate hike and the first cut in the past 40 years. The report adds that Fed Chair nominee (likely a reference to a future appointee) is appointed by a president pushing for lower rates, and fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the pivot is consumer exhaustion: Pantheon reports that strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income households will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing: Pantheon notes that employment growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI's negative impact on labor demand is accumulating, especially in information, finance, and professional services. Pantheon also observes that historically, the Fed moves quickly from tightening to easing, with an average gap of just six months between the last rate hike and the first cut in the past 40 years. The report adds that Fed Chairman Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus will make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will pivot to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. This prediction comes despite a near-term risk of a 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion. Pantheon notes that strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but much of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow significantly in late 2026 and early 2027. Low-income households will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is expected to remain largely unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further support the case for easing, with job growth slowing to a trend of about 75,000 per month in initial estimates, potentially closer to 25,000 after revisions, while AI's negative impact on labor demand accumulates. Pantheon also notes that historically, the Fed's pivot has been swift, with an average of just six months between the last rate hike and first cut over the past 40 years.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will pivot to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that a further 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion: Pantheon argues that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income households will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is expected to remain broadly unchanged until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further strengthen the case for easing: Pantheon notes that employment growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI's negative impact on labor demand is accumulating, especially in high-usage sectors like information, finance, and professional services. Pantheon also observes that historically, the Fed moves quickly from tightening to easing, with the average interval between the last rate hike and first cut in the past 40 years being just six months. The report adds that Fed Chair nominee Kevin Warsh would be appointed by a president pushing for lower rates, and fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End-2027, Even After Possible 2025 Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. This comes despite a near-term risk of another 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver of the pivot is consumer exhaustion: strong household spending in 2025 was fueled by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income households will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market dynamics further strengthen the case for easing: job growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from the last rate hike to the first cut, with an average gap of just six months over the past 40 years. Fed Chair Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus are expected to make it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing next year, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The firm notes that a further 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The pivot is driven by expected consumer fatigue: strong household spending in 2025 was supported by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. Pantheon predicts spending growth will slow markedly in late 2026 and early 2027 as refund support fades and low-income households face balance sheet pressure. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff- and energy-related price increases drop out of year-over-year comparisons. Labor market trends reinforce the case for easing: monthly job growth has slowed to around 75,000 in initial estimates, with revisions possibly bringing it closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from tightening to easing, with an average six-month gap between the last hike and first cut over the past 40 years. Fed Chair Warsh, appointed by a president pushing for lower rates, and the fading of fiscal stimulus are expected to make consensus for rate cuts easier by 2027.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing next year, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The firm notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The pivot to easing is driven by expected consumer exhaustion: strong household spending in 2025 was supported by large tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. Pantheon predicts spending growth will slow significantly in late 2026 and early 2027 as refund support fades and low-income households face balance sheet pressure. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff and energy-related price increases drop out of year-over-year comparisons. Labor market trends reinforce the case for easing: job growth has slowed to a trend of about 75,000 per month in initial estimates, with revisions possibly closer to 25,000, while AI is increasingly weighing on labor demand in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from tightening to easing, with an average gap of just six months between the last hike and first cut in the past 40 years. The report also cites that Fed Chair Warsh was appointed by a president pushing for lower rates, and that fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will shift to aggressive policy easing, lowering the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. This prediction comes despite a near-term risk of one more 25-basis-point rate hike this year due to rising energy costs pushing up core goods prices. The key driver for the expected pivot is consumer exhaustion. Pantheon notes that strong household spending in 2025 was fueled by large spring tax refunds and rising stock prices, but most of that cash has now been spent or used for debt repayment. As refund support fades and low-income household balance sheets come under pressure, spending growth is expected to slow markedly in late 2026 and early 2027. Low-income families will also feel the impact of tighter eligibility requirements for Medicaid and SNAP in 2027. Core PCE inflation is seen as largely stable until late 2026, then making significant progress toward the 2% target in the first half of 2027 as tariff and energy-related price increases drop out of year-over-year comparisons. Labor market trends further support the case for easing, with job growth slowing to a trend of about 75,000 per month in initial estimates—potentially closer to 25,000 after revisions—while AI's negative impact on labor demand accumulates, especially in high-usage sectors like information, finance, and professional services. Pantheon also notes that historically, the Fed's pivot has been swift: the average gap between the last rate hike and first cut in the past 40 years is just six months. With Fed Chair nominee (likely a reference to a hypothetical or future chair) appointed by a president pushing for lower rates, and fiscal policy no longer boosting GDP growth, consensus for rate cuts should be easier to build as 2027 progresses.
Read sourcePantheon Sees Fed Cutting Rates to 3.125% by End of 2027 After Possible Final Hike
Pantheon Macroeconomics forecasts that the Federal Reserve will pivot to aggressive policy easing, cutting the federal funds rate from its current 3.75%-4.00% target range to 3.125% by the end of 2027. The forecast notes that another 25-basis-point rate hike this year remains a near-term risk due to rising energy costs pushing up core goods prices. The expected pivot is driven by consumer exhaustion, as strong household spending earlier this year was supported by large tax refunds and rising stock prices, cash that has largely been spent or used for debt repayment. Pantheon predicts spending growth will slow significantly in late 2026 and early 2027 as refund support fades and low-income households face balance sheet pressure. Low-income families will also feel the impact of tighter Medicaid and SNAP eligibility requirements in 2027. Core PCE inflation is expected to remain broadly stable until late 2026, then make significant progress toward the 2% target in the first half of 2027 as tariff and energy-related price increases drop out of year-over-year comparisons. Labor market trends reinforce the case for easing, with job growth slowing to a trend of about 75,000 per month in initial estimates, potentially closer to 25,000 after revisions, while AI's negative impact on labor demand accumulates, especially in information, finance, and professional services. Pantheon notes that historically, the Fed has moved quickly from the last rate hike to the first cut, with an average gap of six months over the past 40 years. The report also cites that Fed Chair nominee (likely a reference to a future appointee) would be appointed by a president pushing for lower rates, and that fiscal policy will no longer boost GDP growth, making it easier to build consensus for rate cuts as 2027 progresses.
Read source