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Efforts by Fed Chair nominee Kevin Warsh to satisfy President Donald Trump’s demands for lower interest rates look likely to be stymied by high oil prices and inflation, according to respondents to the latest CNBC Fed Survey.
Respondents on average are not fully pricing a single rate cut this year. Just 58% of the 26 respondents see any rate cut at all. The average funds rate is forecast to decline to 3.5%, or just 0.14 percentage point below the current rate, reflecting a combination of those who forecast one cut or more and those seeing the Fed on hold. For 2027, the average funds rate is forecast at 3.2%, reflecting a bit less than two rate cuts.
“Fed Chair Nominee Warsh will probably be hamstrung delivering Trump the rate cuts the president wants because oil prices and inflation will remain higher than hoped for a long time,” said Rob Morgan, senior vice president and market strategist, MOSAIC.
High oil prices are seen pushing up inflation by 0.6 percentage point this year while pushing down growth by a half point. And 81% believe crude prices are likely to push up core inflation as well, compounding the difficulty of cutting rates for the Fed. Core excludes food and energy prices because of their volatility.
