Respondents to the CNBC Fed Survey expect no additional rate hikes from the Federal Reserve and have fully embraced its “higher-for-longer” mantra.The survey also showed a 49% expectation of a recession in the next 12 months and a 42% chance of a soft-landing.
“I believe (Fed Chair Jerome) Powell & Co. can now be patient, sit back and see how all the tightening that has already taken place on the short end and recently on the long end plays out,” Peter Boockvar, chief investment officer for Bleakley Financial Group, wrote in response to the survey. “And it will play out as higher rates continue to squeeze more and more households.
The change can also be seen in the outlook for the fed funds rate, the central bank’s benchmark for short-term lending costs. It’s now forecast on average to end 2024 at 4.6%, assuming about 75 basis points of rate cut. In June, the year-end 2024 funds rate was forecast at 3.8%, which assumed 125 basis points of cuts. A basis point equals 0.01%.The outlook for a more hawkish Fed comes with roughly equal probabilities for recession and a soft landing. headtopics.com
Respondents on average see a 49% probability of a recession in the next 12 months and a 42% probability of a soft-landing. While they have driven up their 2023 GDP forecast from under 1% in June to 2.4% now, they have slashed the outlook for growth roughly in half for 2024 to 0.73%.
“The Fed is too focused on a soft landing and has relegated hitting its target on inflation to a distant ‘eventually,'” wrote Robert Brusca, chief economist at Fact and Opinion Economics. He calls for the Fed to push harder now to bring down inflation and boost unemployment., is seen declining to 2.9% next year and around 2. headtopics.com
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