Federal Reserve's latest survey: Corporate CFOs expect U.S. prices to rise by 4.2% next year, with tariffs remaining the biggest concern

U.S. corporate financial executives generally expect significant price increases next year, and concerns about tariffs remain persistent. This pessimistic outlook directly challenges the Federal Reserve's assessment that inflation will quickly fall back to the 2% target.

On the 17th, a recent survey conducted jointly by the Richmond Fed, the Atlanta Fed, and Duke University's Fuqua School of Business showed that the average CFO surveyed expects prices to rise by 4.2% in 2026. Meanwhile, confidence in both their own business development and the overall U.S. economy has declined in the fourth quarter.

Although fears of trade risks have slightly eased compared to record levels earlier this year, tariff issues are still viewed by financial executives as the primary risk that must be faced. Survey data indicate that inflationary pressures, driven by tariff pressures and rising costs, may be more stubborn and persistent than central bank policymakers expect.

This also means that the current inflation level, which is nearly 1 percentage point above the Federal Reserve's target, may not ease as smoothly in the short term as Fed officials predict, and the market needs to be wary of the risk of high inflation persisting into 2026.

High Inflation Expectations and Policy Divergence

This survey of 548 chief financial officers was conducted between November 11 and December 1. The results show that respondents expect an average price increase of about 4% in 2026, with a specific figure of 4.2%. John Graham, a finance professor at Duke University's Fuqua School of Business and the academic leader of the survey, stated that the survey found evidence of sustained high price growth, with half of the surveyed companies expecting price increases of 3.5% or more.

This data shows a significant temperature difference from the expectations of the Federal Reserve's decision-makers. In the economic forecasts released last week, the median prediction from Fed policymakers indicated that the inflation rate is expected to slow to within less than 0.5 percentage points of the target level by 2026.

However, feedback from the corporate side has raised concerns among some central bank officials. As one of the important indicators referenced by the Federal Reserve, CFO expectations suggest that current inflationary pressures are sticky, and businesses are not ready to end the price increase cycle.

Tariff Pressure and Cost Transmission

Tariffs and trade policies remain the top concerns for corporate financial executives. The survey pointed out that although this risk has weakened compared to record levels in the second quarter of this year—when nearly 40% of respondents listed it as the most pressing issue—it still ranks at the top of their concerns.

John Graham noted that previous surveys have shown CFOs expect the upward pressure on prices from tariffs to persist until 2026, and this quarter's survey further confirms this trend.

In terms of costs, respondents expect unit cost increases next year to slightly exceed price increases, meaning that a 4.2% price increase would barely cover rising costs. However, businesses still hold certain expectations for revenue growth, with an average forecast of nearly 8% revenue growth next year, slightly higher than this year's expected increase

Business Confidence Declines and Moderate Growth

At the macroeconomic level, surveys show that business optimism is cooling. The U.S. Economic Optimism Index (out of 100) fell from 62.9 in the third quarter to 60.2 in the current quarter, also below the recent high of 66 reached after Donald Trump was elected president at the end of 2024.

Regarding the economic outlook for 2026, companies generally hold a cautious attitude, expecting moderate employment and economic growth. The median forecast from surveyed companies indicates that employment is expected to increase by 1.7% in 2026, which is consistent with recent survey results; the annual growth rate of the U.S. economy is expected to be around 1.9%.

In terms of hiring plans, less than half (40%) of companies reported that they are hiring for new positions, slightly below 20% of companies that reported having no hiring plans at all, and about 9% of companies expect to lay off employees