A new survey conducted March 10–15 by Serpa Pinto Advisory and Duke University’s Economics Department polled 21 former Federal Reserve governors, regional bank presidents, and Fed staff. The results reveal that these experienced insiders expect slower economic growth, higher inflation, elevated unemployment, and marginally higher short-term interest rates than the Fed forecasted last December.
Survey participants lowered their projected U.S. GDP growth to approximately 1.7% in 2025 and 1.8% in 2026, down from the Fed’s previous estimates around 2.0–2.1%. They anticipate inflation, measured by the personal consumption expenditures (PCE) price index, will peak at 2.7% in 2025 and 2.5% in 2026—outpacing the Fed’s earlier predictions of 2.5% and 2.1% in those years. Core inflation trends were also revised upward, and unemployment is expected to rise modestly above the Fed’s forecasts.
On interest rates, respondents believe the Federal Reserve will need to maintain slightly tighter policy than anticipated. Instead of the two quarter-point rate cuts anticipated by the Fed, the former officials suggest only one cut in 2025, yielding a terminal federal funds rate of 4.0–4.25%, with another 25-basis-point reduction expected in 2026.
Drivers behind the heightened caution include persistent inflation concerns, uncertainties from global trade conflicts and tariffs, and waning business and consumer confidence. Several respondents warned that a steep escalation in tariffs could trigger stagflation—characterized by stagnant growth and stubborn price increases—with unemployment rising above 5%, inflation hovering between 3–4%, and even a risk of a mild recession.
The survey’s release just before the Federal Reserve’s March 18–19 FOMC meeting offers a preview of potential deviations between insider sentiment and the Fed’s official projections. Numerous past officials expressed crucial recommendations for improving Fed strategy and communication. This includes revising flexible average inflation targeting (FAIT), increasing transparency around forecasting methods, and offering alternative economic scenarios alongside baseline projections.
In summary, the survey reflects a growing consensus that the Fed may need to curb expectations of rapid rate cuts and remain vigilant amid inflationary and trade-driven headwinds. Policymakers are urged to balance slowing growth with constrained inflationary pressure, suggesting a more conservative trajectory for monetary easing moving forward.
