Investors Anticipate Stagflation Amid Slow Federal Rate Cuts, Says CNBC Survey

In a recent survey conducted by CNBC, investors project a challenging economic landscape characterized by stagflation—a combination of stagnant economic growth and rising inflation—despite expectations for slower interest rate cuts by the Federal Reserve. The survey, which included insights from 28 economists, fund managers, and analysts, revealed a general consensus that economic growth will continue to weaken while inflation remains elevated, reflecting a notable shift in sentiment since the beginning of the year.

The June 2025 CNBC Fed Survey indicated that respondents foresee gross domestic product (GDP) growth slowing to an average of 1.13%, a modest increase from the previous estimate of 0.8%, but significantly lower than earlier projections made in January 2025. Furthermore, the likelihood of a recession occurring within the next year has decreased to 38%, down from 53% in May, though this marks an increase from just 23% in January prior to the implementation of aggressive tariff policies by the Trump administration.

According to Doug Gordon, Senior Portfolio Manager at Russell Investments, "Recent geopolitical events in the Middle East add uncertainty into an already uncertain environment on trade, tax policy, and with potentially weakening macroeconomic data pending." Respondents expressed significant uncertainty regarding trade policies, with 71% reporting they are either very or somewhat uncertain about the direction of tariff policies, which continues to cloud the overall economic outlook.

The survey also revealed that while a majority of respondents (54%) expect the U.S. to negotiate a new trade deal with China within the next five months, there are concerns that even if the worst-case tariff scenarios do not materialize, elevated tariffs could persist, leading to prolonged inflationary pressures. Joel Naroff, President of Naroff Economics, emphasized that "the best-case scenario still implies significantly higher tariffs and therefore higher inflation for an extended period."

In terms of monetary policy, the Federal Reserve is anticipated to maintain its current interest rates during its June meeting, with expectations for two rate cuts later in the year, bringing the funds rate down to 3.9% by year-end. Constance Hunter, Chief Economist at the Economist Intelligence Unit, pointed out that the Fed faces a difficult balancing act amid slower growth and adverse supply shocks, stating, "The see-saw between slower growth and adverse supply shocks are difficult to forecast; however, we expect slower growth will ultimately be what causes the Fed to move closer to a neutral stance."

Despite these challenges, some experts highlight resilience within the U.S. economy. Jack Kleinhenz, Chief Economist at the National Retail Federation, remarked, "I expect moderation going forward as tariffs get incorporated into consumer prices and slower job growth due in part to a slower pace of immigration providing less fuel for aggregate disposable income." Mark Vitner, Chief Economist at Piedmont Crescent Capital, noted that despite existing concerns—such as high interest rates and significant budget deficits—the economy continues to demonstrate resilience, with consumers maintaining their spending habits.

The survey's findings reflect a complex interplay of optimism and caution among investors. While the outlook for equities remains positive, with the S&P 500 expected to reach 6,133 by year-end, 58% of respondents believe current stock valuations are excessive, reflecting a degree of skepticism about future earnings growth. As the economic landscape continues to evolve, the interplay between inflation, growth, and Federal Reserve policies will remain pivotal in shaping market dynamics and investor sentiment moving forward.