The Federal Reserve Building is seen before the Federal Reserve Board is expected to signal plans to increase interest rates in March, because it focuses on the Vecht inflation, in Washington, DC, on January 26, 2022.
Joshua Roberts | Reuters
Despite any improvement in the economic prospect, the respondents of the CNBC FED survey of June continue to predict weaker growth and higher inflation than at the start of the year and most say that the uncertainty about the tariff policy remains high.
The chance of a recession in the following year has fallen to 38%, a decrease of 53% in May, but above the 23% level of January before President Donald Trump's aggressive tariff policy was unveiled.
Similarly, the gross domestic product is now expected to grow on average 1.13%, an increase of 0.8% in the earlier survey, but less than half of the expectation of January.
Respondents say that there is a significant lack of clarity, with 71% reporting being very or somewhat uncertain about trade policy.
“Recent geopolitical events in the middle -East add uncertainty to an already uncertain environment about trade, tax policy and with potentially weakening hard macro -economic data in treatment,” said Doug Gordon, senior portfolio manager at Russell Investments. “Recession can be avoided, although this requires some help in mitigating some of these sources of volatility.”
The help, he said, comes from trade agreements and tax policy, in which 29% say that the current tax assessment in the congress makes them more optimistic about growth and 29% says it makes them more pessimistic; 43% say it has no effect on their growth output.
Nevertheless, 82% believe that the federal budget deficit “somewhat” or “considerably increases”.
Trade Deal Optimism
A majority of 54% expects the US to conclude a new trade agreement with China compared to 39% that that does not. On average, those who are looking for a trade agreement believe that it will be signed within about five months.
“Although it seems that the worst-case scenario when it comes to rates will not happen, the best scenario still implies considerably higher rates and therefore higher inflation for a longer period,” said Joel Naroff, president of Naroff Economics.
The Federal Reserve is expected to be Pat during the June meeting and no rates will lower until September. The 28 respondents, who include economists, fund managers and analysts, see two tariff reductions this year, so that the funds rate will bring to 3.9% by the end of the year, but next year only one 25 basic points.
“There are several cross flows of geopolitical events that the FED will have to weigh,” said Constance Hunter, chief economist at the Economist Intelligence Unit. “The saw between slower growth and adverse supply shocks is difficult to predict, but we expect that a slower growth will eventually be, which ensures that the FED comes closer to a neutral position.”
Asked how the FED would respond to a stagflating outcome of higher prices and weaker growth, 54% believe that the central bank will lower the rates, while 39% see the FED -Hold rates stable. That is a bit more ragged than May when 65% saw the Fed cut.
Against a slender margin, the respondents do not believe that the FED will be confronted with that dilemma: 43% believe that rates will result in only “one -off price increases”, while 32% say they cause a broader inflation problem.
61%, however, say that tariff inflation will appear “even more important” in the coming months than it, while 36% see it as “only modest”.
'No shortage' of worries
“I expect (economic) moderation in the future as the rates are included in consumer prices and a slower job growth that is partly due to a slower pace of immigration with less fuel for total disposable income,” said Jack Kleinhenz, chief economist at the National Retail Federation.
In the midst of all those concerns, Mark Vitner, Chief Economist at Piedmont Crescent Capital & Cavu Securities notes that the economy has remained 'resilient, not' rate '.
“There is no shortage of reasons for worry-raised interest rates, enormous budget deficits, geopolitical flare-ups, tariff threats but the US economy proves that his doubters are wrong.”
He added: “Consumers continue to spend and companies double the future -oriented infrastructure: AI, Life Sciences, Defensetech and other emerging technologies.”
The outlook for shares indeed increased, with the S&P 500 that would now be expected to hit 6,133 towards the end of the year, for a modest increase of 1.7% compared to the current level, but a more robust by a 10% increase to 6,625 towards the end of 2026.
“Equity markets are almost all time awaiting certainty that replaces uncertainty about rates, the tax reductions of 2017 are being extended, deregulation, AI productivity and FED soup,” said Hank Smith, head of investment strategy, Haverford Trust Co. “If all this takes place, the economy would have to rearrange in the second half of '26.”
When it comes to current stock levels, 58% believe that they are too expensive and 36% believe that they are correctly priced compared to their prospects for income and the economy. Only 7% see shares as too expensive.
