Federal Reserve rate hike expectations shift to December, CNBC survey shows

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Fed rate hike December view

Highlights

CNBC’s latest Fed Survey shows 93% of respondents expect a pause at this week's meeting, with 76% anticipating a rate hike in December and about two more hikes in 2025.
US GDP growth forecasts rise to 2.4% for 2024 with recession risk dropping to 26%, while S&P 500 projections for 2025 fall to 8,033 from 8,274.
Respondents expect 10-year Treasury yields to remain above 5% this year and list inflation, debt issuance, the Iran war, and a potential AI bubble as key market risks.

Survey signals pause now, tightening later

As reported by CNBC, its latest Fed Survey of 30 fund managers, strategists and economists shows 93% expect the Federal Reserve to pause at this week's meeting, while 76% anticipate a rate hike in December. More than half of respondents also expect additional increases next year, averaging about two hikes.

A plurality of 40% says the Fed must slow growth below potential to bring inflation under control. That compares with 27% who say the Fed does not need to slow the economy and 23% who believe it only needs to slow somewhat.

The survey finds 70% view inflation as broader than higher energy prices alone. While 30% say the Fed should raise rates at the current meeting, respondents also expect at least two voting policymakers to dissent from any decision to keep rates unchanged.

Views remain divided over the urgency of further tightening. Richard Bernstein, global head of macro investing at Janus Henderson Investors, says the case for delay is hard to justify given strong nominal GDP growth and warm inflation indicators, while Mark Zandi, chief economist at Moody's Analytics, argues weakening wages and broader market risks make this the wrong moment for another increase.

Growth outlook stays firm despite market risks

Respondents still see U.S. economic growth remaining above potential despite high inflation, expected Fed tightening and persistently high oil prices. GDP forecasts for this year rise to 2.4%, and the 2027 outlook edges slightly lower but remains above potential at 2.2%, while 2025 growth comes in at 2.05%.

The perceived probability of a U.S. recession in the next year falls to 26% from 29% in the prior survey. At the same time, the outlook for the S&P 500 remains stable for this year at around 7,600, but the forecast for next year declines to 8,033 from 8,274 in the previous survey.

Unemployment is expected to hold at 4.2% through the rest of the year before rising to 4.4% in 2027. The Consumer Price Index is seen easing to 3.6% from 3.7% in September, then falling more meaningfully next year to 2.6%.

Respondents identify the continuation of the Iran war and a potential artificial-intelligence bubble burst as the biggest risks. They also see Treasury yields staying elevated, with the 10-year yield remaining above 5% this year before slipping to 4.8% in 2027, as inflation, growth, debt issuance and expectations for a higher Fed funds rate continue to pressure the bond market.

The congressional election is also viewed as a market risk, with 63% saying legal challenges could prolong uncertainty over which party controls Congress. More than half of respondents see Democratic control of both houses as the most likely outcome, while 41% expect higher deficits regardless of which party prevails.

Our earlier coverage of the S&P 500’s push toward 8,000 examined how the index’s AI-led rally was running into a tougher backdrop of higher oil prices, elevated Treasury yields, and election-related uncertainty. The piece also flagged concentration and breadth risks, noting that much of the market’s performance hinged on a narrow group of megacaps even as many components lagged.

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