Kevin Warsh is set to lead his first meeting as Federal Reserve chairman, but according to the latest CNBC Fed Survey, no changes to interest rates are anticipated in the near term. The survey, which included 32 respondents such as economists, fund managers, and strategists, found consensus that there will be no rate change at this meeting or any meeting through 2027. However, 88% of respondents expect the Fed to remove the easing bias from its statement, which has previously signaled that the next move would likely be a rate cut [1].
Warsh, selected by a president who has long advocated for lower rates, faces a challenging environment marked by high inflation, attributed in part to President Donald Trump's tariffs and the ongoing war with Iran. These factors have delayed any potential rate cuts, pushing them out of the forecast horizon for both the Fed Survey and Fed Funds futures markets [1]. Gregory Daco, chief economist at EY, noted that while Warsh is generally seen as dovish, he inherits a more hawkish committee, with several policymakers arguing that rate hikes should remain an option if inflation stays above target. Energy-driven inflation pressures have reinforced this stance [1].
Despite Warsh's previous comments that rates could be lower, he has not indicated whether his outlook has shifted in light of recent inflation and strong jobs data. The announcement of a potential deal with Iran, which occurred after the survey, could provide Warsh with more flexibility to cut rates sooner than currently expected. For now, respondents do not believe high oil prices will prompt the Fed to hike rates, and they see the federal funds rate remaining at the current level of 3.62% through 2027 [1].
The survey also highlights a resilient U.S. economy, with forecasters raising their growth outlook, lowering the probability of recession from 33% in April to 25%, and reducing expectations for the unemployment rate. The outlook for U.S. GDP has rebounded to 2.2% for this year and 2.3% for next year, recovering most of the downgrade linked to hostilities with Iran. The unemployment rate is expected to remain near the current 4.3% for this year and next [1]. Several respondents believe the strong job market should prompt the Fed to focus more on inflation, which has been above target for most of the past six years [1].
CONCLUSION
The CNBC Fed Survey indicates that under Kevin Warsh's leadership, the Federal Reserve is expected to keep rates unchanged for the foreseeable future, while removing its easing bias. Market sentiment is cautiously optimistic, with improved economic forecasts and a lower probability of recession, but inflation remains a key concern for policymakers.