Fed Raises Rates 0.25 Points to Fight Inflation Despite Trump Pushback

Expectations for Federal Reserve policy have shifted markedly in recent weeks, with a new survey indicating that most forecasters now anticipate at least two interest rate increases over the coming year. The change reflects both fresh data on inflation and signals from the central bank under its relatively new leadership.

The CNBC Fed Survey of economists, fund managers and strategists found that 86 percent of respondents now project at least one rate hike within the next twelve months, up from 46 percent in the prior month. More than half expect two or more increases. The results mark a clear departure from earlier assumptions that any tightening would prove brief and contained.

Those revised forecasts coincide with several developments. Oil prices have remained elevated following disruptions in the Strait of Hormuz tied to the conflict that began earlier this year. Respondents largely expect those prices to stay high for at least six months. At the same time, measures of consumer prices have not shown the cooling that some had anticipated. Average projections for inflation have moved higher, reaching roughly 3.5 percent for 2026 before easing to 2.85 percent the following year.

Fed Chair Kevin Warsh has contributed to the shift in expectations. In a speech at Jackson Hole, he emphasized that simply waiting for inflation to subside would not suffice and that policy adjustments would be required if price pressures broadened. Survey participants appear to have taken that message seriously. Roughly three-quarters now view the inflation problem as extending beyond energy costs alone, raising the possibility that higher input prices could feed into wages and other goods and services.

Not every observer agrees that immediate action is warranted. Mark Zandi, chief economist at Moody's Analytics, has argued that the economy continues to expand at a steady 2 percent pace and that the risks of overtightening remain substantial. He noted that markets are already pricing in a quarter-point increase at the Federal Open Market Committee's meeting this week along with additional moves later. In his view, such expectations could push the Fed into a policy error if underlying demand proves softer than recent price readings suggest.

The survey also highlights uncertainty about how long the current energy shock will last and whether it will produce lasting changes in inflation expectations. Several respondents questioned whether conventional rate increases can quickly offset cost pressures driven by fuel prices. Others pointed to the limited ability of monetary policy to address supply-side constraints that originated outside the domestic economy.

Taken together, the results illustrate how quickly professional forecasts can adjust when incoming data and leadership signals reinforce one another. The Federal Reserve now faces a set of projections that embed both higher near-term inflation and a more sustained path of policy tightening than seemed likely only a month earlier. How those projections evolve will depend on the interplay between geopolitical developments, price trends and the central bank's own communications in the months ahead.