A shopper looks at egg cartons at a grocery store in New York City on February 12, 2025. Photographer: Yuki Iwamura/Bloomberg.
Economists now expect the Federal Reserve’s preferred inflation metric to rise at a brisker pace in the near term, which will prompt policymakers to keep interest rates elevated for longer.
In the latest Bloomberg survey of economists, respondents predicted that the core personal consumption expenditures (PCE) price index—which excludes the often-volatile food and energy categories—will advance 2.6 percent in the first quarter, up from the 2.5 percent rate expected last month. They also see overall PCE and the consumer price index (CPI) increasing at a faster pace this year.
Recommended For You
As a result, forecasters are now projecting that Fed officials won’t cut interest rates again until July, compared with May in last month’s survey. Minutes from the Fed’s January meeting, released earlier this week, showed officials prefer to hold interest rates steady amid stubborn inflation and uncertainty around the Trump administration’s policies.
“Longer-term interest rates will average around current levels in 2025 as financial markets anticipate inflation from tariffs, a hotter job market, and fiscal stimulus from Congress extending tax cuts,” said Comerica Bank economists Bill Adams and Waran Bhahirethan.
Bloomberg’s latest survey of 91 economists, conducted on February 13 to 19, also showed higher near-term growth estimates. The economists see gross domestic product (GDP) advancing at a 2.3 percent annualized rate in 2025, as higher estimates for consumer spending are seen offsetting weaker business investment and trade. At the same time, projections for imports in the first quarter are up substantially, likely reflecting expectations that U.S. companies will stockpile foreign goods to front-run additional tariffs from President Donald Trump.
Economists now see a 25 percent chance of a recession in the next 12 months—up from 20 percent in January, marking the first increase in about two years. However, those odds are still well below the most recent peak of 65 percent in the first half of 2023 when the Fed was still raising interest rates.
————————————————————
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
