Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee on the Hart Senate Office Building in Capitol Hill, on February 11, 2025.
Chip somodevilla | Getty Images News | Getty Images
Respondents in the March CNBC Fed survey raised the risk of a recession to the highest level in six months, cutting 2025 growth forecasts and increasing inflation outlook.
Much of the change appears to be due to concerns over the Trump administration, particularly the fiscal policy from the tariffs. In particular, it is now considered to be the highest threat to the US economy, replacing inflation. The S&P 500 outlook has declined for the first time since September.
Thirty-two survey respondents, including fund managers, strategists and analysts, increased the chances of a recession to 36% from 23% in January. The numbers fell to their lowest in three years in January, appearing to reflect the first optimism after President Trump’s election. But like many consumers and business research, the probability of a recession is currently showing considerable concern about the outlook.
“We had a wealth of discussion with investors increasingly concerned that Trump’s agenda has fallen off the railroad due to trade policy,” said Barry Knapp of Ironside’s macroeconomics. “As a result, the economic risks of something more insidious than soft patches are growing.”
“The degree of policy volatility is unprecedented,” said John Donaldson, bond director at Haverford Trust.
The average GDP forecast for 2025 fell from 2.4% to 1.7%. This is a rapid markdown that ended a successive increase in three previous surveys date back to September. GDP is projected to bounce back to 2.1% in 2026, in line with previous forecasts.
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“The risks to consumer spending are skewed into the downside,” said Neil Dutta, head of economic research at Renaissance Macro Research. “With the frozen housing market and declining state and local government spending, there are meaningful downsides to current estimates of GDP for 2025.”
Fed rate reduction outlook
Most people continue to believe that the Fed will cut fees at least twice and will not raise rates even if prices are sustained high and growth is weak. Three-quarters forecast more than two quarterpoint cuts this year. Part of the reason is that two-thirds believe tariffs will result in a one-off price increase rather than a wider outbreak of inflation. However, policy uncertainty has generated a broader view than usual, with 19% expecting the Fed to cut at all.
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Still, higher tariffs and weak growth are a dilemma for the Fed.
“Powell is really stuck here because of the tariff overhang,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “As the unemployment rate rose, he worried more about growth for them and cut the rates, but once Trump removed all the tariffs, he jumped over the gun.”
Over 70% of respondents believe that tariffs are bad for inflation, employment and growth. 34% say tariffs will reduce US manufacturing, while 22% will not bring about change. 37% of respondents believe that tariffs will increase production output. Over 70% believe Doge’s efforts to reduce government employment are bad for growth and jobs, but they think it will be deflationaly in moderation.
“The global trade war, the coincidence of doge could reduce government work and funding, aggressive deportation of immigrants, and DC impairment, and drive a highly performant economy into a recession.”
