A majority of respondents to the CNBC Fed Survey now expect at least two rate hikes over the next year, with 55% forecasting more than one increase. The shift follows a hawkish Jackson Hole speech from Fed Chairman Kevin Warsh, surging oil prices, and inflation forecasts that climbed toward 3.5% for this year.
It's not one and done anymore. A majority of respondents to the CNBC Fed Survey now forecast at least two hikes over the next one year, with a third predicting three or more. That marks a sharp reversal from last month, when just 46% expected any hike at all — a share that has grown to 86%, with 55% now expecting more than a single increase.
Oil and a hawkish Warsh drive the shift
Since last month, Fed Chairman Kevin Warsh delivered a hawkish speech in Jackson Hole, oil prices surged, and inflation failed to cool. Respondents now seem to believe inflation has spread beyond energy and won't take care of itself without Fed action.
According to CNBC: "There is nothing in the data that suggests inflation will return to target 'soon'", said Neil Dutta, head of economic research at Renaissance Macro Research. Most of the 29 respondents — economists, fund managers and strategists — believe the Strait of Hormuz will remain closed at least a month longer and that oil prices will stay elevated for more than six months.
Roughly three quarters of respondents see the inflation problem as broader than just energy prices. CPI forecasts rose for both years, with the average estimate climbing to near 3.5% for this year before settling at 2.85% in 2027. Several respondents, however, questioned the Fed's ability to lower fuel-driven inflation through further hikes alone, since the tool has limited reach over supply-driven price pressure.
Growth outlook holds steady
Despite the shift toward multiple rate hikes, the growth outlook has barely moved. Recession concerns remain roughly unchanged, with an average 29% probability estimated over the next 12 months. GDP is still seen near 2.25% this year and next, up from 2.1% in 2025, while the unemployment outlook holds around 4.25%. Forecasts for stocks remain buoyant, with the S&P 500 projected to hold its current level through year-end and rise 8% to 8,274 next year.
That raises a tension the survey itself flags: the Fed typically has to slow the economy to bring inflation down, meaning growth would need to dip below potential for inflation to decline. As Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, put it, something has to give — either inflation falls, the Fed hikes further, or long-end yields keep selling off.
Warsh's Jackson Hole speech lands well
Views on Warsh's communication and independence turned largely positive after his Jackson Hole remarks. Fifty-nine percent of respondents say he has provided enough information on his policy views, while 66% say his conduct of monetary policy is very or mostly independent — though that marks a 9-point decline from the prior survey. Just 31% now say the Fed "talks too much," down from 68% in July.
Warsh was still seen as offering the most important information about the outlook, followed by Fed Governor Christopher Waller and New York Fed President John Williams. Continued high inflation, the Iran War and high oil prices ranked as the top three risks to the expansion, while 61% cited some market risk stemming from ongoing legal battles tied to the midterm elections.
Source: CNBC
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