Amid Uncertainty, Expectations for Interest Rate Cuts Taper Off
A recent CNBC Fed Survey has revealed that respondents have scaled back their expectations for interest rate cuts in 2025, despite still believing the Federal Reserve will ease monetary policy this year. The survey, which polled 25 economists and market strategists, found that 65% expect two rate cuts in 2025, down from 78% in the previous survey. Additionally, 61% forecast at least one rate cut in 2026, down from 70% in December.
The survey also revealed that respondents are divided on the effects of President Donald Trump’s economic policies. While some see tariffs as negative for inflation and growth, others believe deregulation will reduce inflation and boost growth. The survey found that 64% believe Trump’s policies will be somewhat or very inflationary, while 60% believe they will be somewhat or very positive for growth.
The survey also highlighted a decline in the probability of recession, with 23% of respondents predicting a recession in the next 12 months, down from 29% in the previous survey. The 12-month outlook for the consumer price index nudged up to 2.7% for this year, and to 2.6% for next year.
Respondents also expressed doubts about Trump’s ability to drive down inflation by increasing energy production and reducing energy prices, with 64% saying they don’t believe he will be successful. The survey also found that respondents are divided on the likelihood of Trump respecting the Fed’s independence, with 36% believing he will do so.
The survey’s findings reflect the uncertainty surrounding fiscal policy and the persistence of inflation, and suggest that the Fed may not be able to ease monetary policy as much as previously expected.
