CFOs lift inflation outlook, cite rates as top concern in Fed survey

Corporate finance chiefs anticipate higher inflation and are increasingly concerned about rising interest rates, according to a new survey from the US Federal Reserve. The quarterly poll, which surveyed around 500 firms between August 17 and September 4, indicated that CFOs expect to increase prices by an average of 5.3% this year, up from 4.6% in the second quarter. For next year, price increases are projected to average 4.5%, an increase from the 4.1% forecast in the previous survey.

While overall economic optimism among financial officers remained strong, concerns about financing have begun to temper the outlook, particularly for smaller businesses. Monetary policy emerged as the most cited issue, with approximately 20% of firms placing it at the top of their concerns, a notable increase from less than 15% in the prior survey. This shift in focus aligns with the Federal Reserve's move towards rate hikes aimed at curbing persistent inflation.

About a fifth of small firms reported that financing constraints were hindering their expansion plans or making it difficult to cover costs. Furthermore, firms overall anticipate reduced capital investment in the next six months compared to the previous outlook. Among companies not planning to invest, 42% cited unfavorable financing conditions or the need to preserve cash as the primary reasons, a rise from 32% six months prior.