No one and done: The Fed will hike at least two times over the next year, according to CNBC survey
While higher oil is cited as a main reason for the change in view, roughly three quarters of respondents see the inflation problem as broader than just energy prices.
Federal Reserve Rate Hikes Expected
A recent CNBC Fed Survey indicates that a majority of respondents expect the Federal Reserve to implement at least two interest rate hikes over the next year. This marks a significant shift from last month, when only 46% of respondents anticipated a rate hike. The current survey shows that 86% of respondents expect a hike, with 55% predicting more than one increase.
Inflation Concerns on the Rise
The change in expectations is largely attributed to recent economic developments, including a hawkish speech by Fed Chairman Kevin Warsh in Jackson Hole, a surge in oil prices, and persistent inflation. Respondents now believe that inflation has spread beyond the energy sector and will not subside without action from the Fed. Neil Dutta, head of economic research at Renaissance Macro Research, notes that “there is nothing in the data that suggests inflation will return to target ‘soon.’” He quotes Fed Governor Christopher Waller, who stated that “sternly staring at inflation until it melts before our withering gaze is not an option.”
Economic Outlook and Inflation Expectations
Most respondents, including economists, fund managers, and strategists, expect the Strait of Hormuz to remain closed for at least a month and oil prices to stay elevated for more than six months. Kathy Bostjancic, chief U.S. economist at Nationwide, expresses concern that higher energy prices could spill over to other goods and services, affecting inflation expectations. Approximately three‑quarters of respondents see the inflation problem as broader than just energy prices. CPI forecasts for 2026 and 2027 have increased, with the average forecast rising to near 3.5% for this year and settling at 2.85% in 2027.
Challenges for the Federal Reserve
Some respondents are skeptical about the Fed’s ability to lower fuel‑driven inflation with rate hikes. Douglas Gordon, senior portfolio manager at Russell Investments, notes that “the FOMC faces a challenge in showing institutional credibility vis‑a‑vis the inflation piece of its mandate relative to its limited ability to impact supply‑driven inflation using its rate setting tool.” The Fed will decide on rates on Wednesday, following its two‑day meeting.
Growth Outlook and Recession Concerns
Despite the shift towards expecting multiple Fed rate hikes, the growth outlook remains largely unchanged. Recession concerns remain steady, with an average 29% probability estimated over the next 12 months. GDP is still expected to be around 2.25% this year and next, up from 2.1% in 2025. The unemployment rate outlook remains around 4.25%. Forecasts for stocks remain positive, with the S&P 500 expected to maintain its current level through year‑end and rise 8% to 8,274 next year.
Compatibility of Forecasts
The question remains whether these forecasts are compatible. Generally, the Fed needs to slow the economy to impact inflation, which would typically require growth to dip below potential for inflation to decline. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, notes that “economic conditions in the U.S. are incompatible with the Fed’s policy rate. Something has to give — either inflation needs to fall or the Fed has to hike—or the long end of the U.S. yield curve will continue to sell off.”
Views on FED Chairman Warsh
Respondents largely view Fed Chairman Warsh positively, citing his Jackson Hole speech as having an impact. Fifty‑nine percent of respondents believe he has provided enough information on his economic and monetary policy views. Sixty‑nine percent say the administration’s push for lower rates will have no effect on the outcome of this month’s meeting. Sixty‑six percent believe his conduct of monetary policy is very or mostly independent, although this represents a 9‑point decline from the prior survey. Respondents believe that too little information from the Fed chairman could result in less effective monetary policy and more volatility.
Communication and Independence
Just 31% of respondents now say the Fed “talks too much,” compared with 68% in July. This could indicate support for Warsh’s less verbose communication style. While 69% say the Fed should not provide regular forward guidance, 59% believe it should regularly offer its reaction function, or how policy is expected to develop relative to incoming data. Warsh is seen as offering the most important information about the outlook and policy, followed by Fed Governor Waller and New York Fed President John Williams. Most Fed bank presidents and other Fed governors are far behind in terms of providing valuable insights.
Source: CNBC · 2026-09-15