Fed Raises Rates 0.25 Points to Fight Inflation Despite Trump Pushback

A new survey of economists and market professionals shows the Federal Reserve is likely to raise interest rates at least twice over the coming year, a sharp shift from just weeks ago when fewer than half expected any move at all. The change follows a hawkish speech from Chairman Kevin Warsh in Jackson Hole and persistent spikes in oil prices tied to the closure of the Strait of Hormuz. Respondents now see inflation spreading beyond energy costs and requiring direct action from the central bank.

The CNBC poll of 29 participants found 86 percent forecasting at least one hike, with 55 percent expecting two or more. Forecasts for consumer price growth have been revised upward to around 3.5 percent for this year and 2.85 percent for 2027. Most participants believe oil prices will stay elevated for more than six months, raising the risk that higher energy costs bleed into other goods and services. Neil Dutta of Renaissance Macro Research noted there is little evidence inflation will return to target levels soon, echoing comments from Fed Governor Christopher Waller that passive waiting will not solve the problem.

Yet not everyone inside the policy debate agrees aggressive tightening is the right response. Mark Zandi, chief economist at Moody's Analytics, warned that the odds of a serious policy mistake are rising quickly. He pointed out that markets have already priced in a quarter-point increase at the Fed's upcoming meeting and further hikes beyond that. Zandi described the broader economy as stable, with steady 2 percent growth and relatively healthy conditions that do not yet justify tighter credit.

The contrast highlights a familiar pattern. When the Fed moves, ordinary households feel the effects first through higher mortgage rates, auto loans, and credit card balances. Businesses face increased borrowing costs that can slow hiring and expansion. The survey respondents acknowledge these risks but appear more focused on containing price pressures that have lingered since the conflict in the Middle East began earlier this year. Three-quarters of those polled see the inflation problem as wider than energy alone, suggesting the Fed may need to act even if fuel prices eventually ease.

Warsh has signaled he will support higher rates if inflation fails to moderate. That stance marks a departure from earlier guidance that markets had grown accustomed to, contributing to unease on Wall Street. The survey indicates many professionals now view the central bank as committed to a longer tightening cycle than previously anticipated. Still, the caution from figures like Zandi serves as a reminder that past rate campaigns have sometimes overshot, pushing unemployment higher and tipping growth into contraction.

For American families already dealing with elevated living costs, the prospect of repeated increases carries direct consequences. Higher borrowing expenses can delay home purchases, reduce discretionary spending, and add pressure on wage earners who lack the flexibility of large institutions. The data on inflation expectations shows households anticipating prices to remain above the Fed's long-term target for some time. Whether multiple rate moves will reverse that trend without broader damage remains the open question driving the current divide among forecasters.