Kevin Warsh's first meeting as Federal Reserve chairman is anticipated to result in no immediate changes to interest rates, as indicated by the CNBC Fed Survey of 32 economists, fund managers, and strategists. A significant 88% of respondents expect the Fed to remove its easing bias, which previously suggested potential rate cuts.
Warsh, nominated by a president advocating for lower rates, faces a committee that has shifted towards a more hawkish stance due to ongoing inflation pressures, particularly from energy costs. Despite Warsh's dovish reputation, he inherits a committee that may consider rate hikes if inflation remains above target.
The survey shows a resilient economy, with GDP growth expectations rising to 2.2% for this year and a reduced recession probability from 33% to 25%. While inflation is viewed as the primary risk, concerns about overvaluation in AI stocks are also prominent, with 84% of respondents believing AI stocks are overpriced.
Overall, the market outlook remains cautious, with the S&P 500 projected to reach nearly 8,000 by 2027, reflecting a modest gain. The survey highlights a general expectation for Warsh to streamline Fed communications, although there is little support for lowering rates at this time