Inflation could get in the way of Warsh's desire to cut interest rates, CNBC survey finds

• The average federal funds rate is forecast at 3.5% for 2026 and 3.2% for 2027, reflecting less than two total rate cuts over the period despite presidential pressure
• Inflation forecasts rose to 3.1% from 2.7% pre-war, with 81% of respondents believing crude prices will push up core inflation, compounding challenges for rate cuts
• GDP growth projections declined to 1.9% for 2026 (down 0.5 points from January) with unemployment expected to tick up to 4.5% from the current 4.3%

Summary: Fed Rate Cut Outlook Dimmed by Inflation Concerns

Key Findings:

A CNBC Fed Survey reveals that Federal Reserve Chair nominee Kevin Warsh faces significant obstacles in delivering President Trump's desired interest rate cuts, primarily due to elevated oil prices and persistent inflation.

Rate Cut Expectations:

• Only 58% of 26 survey respondents anticipate any rate cut in 2025
• Average federal funds rate forecast: 3.5% for 2025 (just 0.14 percentage points below current levels)
• 2027 forecast: 3.2% (reflecting less than two cuts)

Inflation and Oil Impact:

• High oil prices expected to increase inflation by 0.6 percentage points this year
• 81% of respondents believe crude prices will push up core inflation (excluding food and energy)
• Inflation forecast raised to 3.1% from 2.7% pre-war, falling to 2.6% in 2027
• By 69% to 31% margin, respondents expect the Fed to avoid hiking rates despite inflation

Economic Growth:

• GDP growth forecast lowered to 1.9% (down 0.5 points from January pre-Iran War estimates)
• Modest rebound to 2.1% expected in 2027
• Unemployment projected to tick up to 4.5% from current 4.3%

Market Implications:

The survey suggests recession risk remains elevated at 33%. Stock market expected to remain stagnant near current levels through 2025, with stronger gains anticipated in 2027 around 7,700.

Experts indicate the Fed may need to signal "optionality" on rate direction, with potential for increases rather than cuts. The consensus points to economic resilience and sticky inflation arguing against rate reductions regardless of Fed leadership.