Fed to still cut rates this year, even as high oil prices spark an uptick in inflation: CNBC Fed Survey

Three weeks into the U.S. attack on Iran, respondents to the CNBC Fed Survey forecast oil prices to remain high for several months, inflation to increase and growth to take a modest hit.

But they believe the Federal Reserve could still cut rates this year.

The 32 respondents, including fund managers, analysts and economists, see oil prices on average at $88 a barrel six months from now. That would lead to a half-point increase in the Consumer Price Index and shave 0.3% percentage points off of growth. The probability of recession during the next 12 months rose 8 points to 31%. While that’s elevated, it’s still well below the 53% level of concern followed the Liberation Day tariffs in April.

“My forecast is contingent on a resumption of oil shipments through the Strait of Hormuz within the next month,” said economist Robert Fry. “If that doesn’t happen, oil prices will go much higher, and I will put a recession in my forecast.”

The survey found 44% believe the Strait will be closed for less than a month and 38% saying it will be closed for longer.