Wolters Kluwer survey: 91% of business economists expect tariffs to significantly push up inflation
The latest Wolters Kluwer survey shows that 91% of business economists expect tariffs to significantly boost inflation, with this year's inflation expectation rising to 2.6%, well above the Fed's 2% target; economic growth expectations have slowed to 2%, and the probability of a recession has risen to 31%. Most economists expect the Fed to hold steady at its March meeting, with a possible rate cut only in June or later.
Key Points
- Wolters Kluwer released a survey on Monday showing that nine out of ten business economists expect U.S. tariffs to push inflation to 2.6% this year, well above the Federal Reserve's 2% target, and drag annual economic growth down to 2%.
- Surveyed companies include Comerica, Ford Motor, Visa, and Eaton Corporation, among others. They expect a 31% probability of a recession this year, up 6 percentage points from last month.
- Sandy Batten, senior economist at Haver Analytics, said that a "whirlwind" of policy changes—especially erratic tariffs, threats of a global trade war, potential mass federal employee layoffs, and possible sharp cuts in federal government spending—has shaken consumer and business confidence and raised concerns about so-called "stagflation-lite," where high inflation coexists with low growth.
In-Depth Analysis
Federal Reserve Chair Jerome Powell reiterated last Friday his consistent view that inflation will gradually decline along a "bumpy" path, ultimately reaching the central bank's target. Powell pointed to signs of improving price stability trends and a strengthening labor market, and said thatpolicymakers are in no hurry toadjust the current federal funds rate range of 4.25% to 4.75%.
Powell also said that the impact of tariffs and the changes in regulation, federal spending, and immigration policy planned by the Trump administration remains unclear, so monetary policy must be cautious. He said, "As we parse incoming information, we are focused on separating the signal from the noise. We are not in a hurry to act, and we are well positioned to wait for greater clarity." He added, "Policy is not on a preset course."
Batten noted that economists now expect the central bank to cut rates by a cumulative 0.42 percentage points this year, compared with a November forecast of cumulative cuts of 1.08 percentage points in 2025. Survey respondents expect "the Fed to be more restrained going forward" and anticipate "a considerable pause before the next federal funds rate cut."
Batten said none of the surveyed economists expect policymakers to adjust the main interest rate at the March 18-19 meeting. The Wolters Kluwer survey shows that 43% of economists expect the Fed to cut rates by 25 basis points next in June, while 50% expect the cut to occur at a meeting after June.
"The consensus inflation forecast has clearly risen," Batten said. "In response to a special question, 91% of respondents believe that higher tariffs will significantly boost inflation."
The survey shows that economists believe the central bank may struggle to push inflation down to its 2% target over the long term. They forecast that the personal consumption expenditures price index will average 2.2% from 2027 to 2036, according to Wolters Kluwer data.