Despite the expected arrival of a new Trump-appointed Federal Reserve chair in coming months, respondents to the CNBC survey are only forecasting modest changes to the funds rate over the next two years.
The results, which mirror pricing in Fed Funds futures market, show that neither Wall Street nor economic forecasters believe that the next Fed chair will drive down overnight rates towards the low levels demanded by the president.
The survey shows the average outlook is for two more quarter-point cuts this year, or 50 basis points, with no cuts expected yet for 2027. The Funds rate is seen settling around 3% this year and staying there through 2027. President Trump, who is currently considering who to name to replace Fed Chair Jerome Powell, has said U.S. rates should be among the lowest in the world and asked for the Fed to reduce interest rates to 1%.
Given a 2% inflation rate, the president is essentially asking for negative real rates.
A reason for the firmer rate outlook could be an improving growth view. GDP is forecast this year to come in at 2.4%, and 2.2% next year, both higher than what the Fed has typically viewed as potential growth of the economy. The unemployment rate is seen rising just a tenth from the current level to 4.5% by year end and dropping slightly next year.
