Fed is likely to lower rates only two more times, even under Trump's next chair pick: CNBC Fed survey

• Survey shows federal funds rate settling at 3% through 2027 with no cuts expected in 2027, while Trump has demanded rates drop to 1% (effectively negative real rates given 2% inflation)
• Recession probability dropped to 23% from 30% in December, with GDP forecast at 2.4% for 2026 and unemployment only rising to 4.5%, supported by AI-driven capital spending and consumer strength
• 50% of respondents expect Kevin Warsh to be named Fed chair (versus Rick Rieder leading prediction markets), though 44% believe Chris Waller should get the position; majority concerned about Fed independence if Trump appointees dominate the Board

Summary: Fed Rate Cut Expectations Remain Limited Despite Trump's Chair Appointment

Key Survey Findings

The latest CNBC Fed Survey reveals forecasters expect only two more quarter-point rate cuts in 2026 (50 basis points total) with no cuts anticipated for 2027. The federal funds rate is projected to settle around 3% and remain there through 2027, contradicting President Trump's demand for rates as low as 1%—essentially negative real rates given current inflation.

Economic Outlook

• GDP growth: 2.4% (2026), 2.2% (2027)—above the Fed's typical potential growth estimates
• Unemployment: Expected to rise modestly to 4.5% by year-end 2026
• CPI inflation: Forecast at 2.7% (2026), declining to 2.5% (2027)
• Recession probability: Dropped to 23% from 30% in December, down from 53% peak in May

Leadership Transition

50% of respondents expect former Fed Governor Kevin Warsh to be named the next Fed Chair, despite prediction markets favoring BlackRock's Rick Rieder. However, 44% believe Fed Governor Chris Waller should get the position. Concerns persist about Fed independence if Trump appointees control the Board majority.

Market Drivers and Risks

Positive factors: Strong capital spending (driven by AI investment), resilient consumer spending, and elevated productivity creating a "1990s-like" economic environment.

Top concerns: Uncertainty around Trump administration policies, potential AI bubble burst, threats to Fed independence, tariffs, and geopolitical risks (including Greenland tensions).

While 58% believe the majority of tariff effects are behind the economy, tariffs are still expected to add approximately 0.3% to inflation this year while pressuring growth and retail margins.