Why CFO Price Forecasts Signal Persistent Core Inflation

The latest data from the quarterly CFO Survey, conducted by the Federal Reserve Banks of Richmond and Atlanta and Duke University, indicates that core consumer price index (CPI) inflation may remain stubbornly elevated throughout 2026. CFOs reported expected price growth of 3.6% for the current calendar year, a figure derived from surveys fielded between February 17 and March 5, 2026. This period coincided with the onset of the Iran conflict and a subsequent spike in crude oil prices, providing a real-time window into how financial decisionmakers are adjusting their pricing strategies in response to supply-side shocks.

The Mechanism of Firm-Level Pricing

Unlike traditional surveys that ask respondents to forecast economy-wide inflation, the CFO Survey focuses on the expected year-over-year price change for the product line or service accounting for the largest share of a firm's domestic revenue. This distinction is critical for market participants. Because CFOs possess direct, granular visibility into their own cost structures, demand conditions, and inventory turnover, their price-setting behavior often serves as a leading indicator for realized core CPI. Historical data from 2001 to 2026 confirms that this firm-level measure tracks realized core CPI inflation more accurately than many professional forecasts, which often struggle to capture the immediate impact of supply-side volatility.

For traders and analysts, the 3.6% expectation is a significant data point. It sits well above the pre-pandemic average of 1.8% recorded between 2001 and 2019. While this is a decline from the 4.9% peak observed for 2023, the persistence of these expectations suggests that the inflationary impulse has not yet fully normalized to the Federal Reserve’s 2% target. The gap between the CFO-derived 3.6% and the 2.9% projection from the Philadelphia Fed’s Survey of Professional Forecasters (SPF) highlights a potential divergence: either firms are bracing for continued cost pressures that professional forecasters have yet to bake into their models, or corporate pricing power remains more resilient than the broader macroeconomic consensus assumes.

Sectoral Sensitivity and Tariff Revisions

The survey data also reveals how firms react to policy shocks. During 2025, the Liberation Day tariff announcements in April triggered the largest quarter-to-quarter revision in price growth expectations since the pandemic, with forecasts rising by nearly a full percentage point. While expectations moderated in the second half of 2025 following partial tariff reversals, the retail and wholesale trade sectors proved an exception. In these segments, price growth expectations continued to rise through the third quarter, illustrating the lagged pass-through effect as firms worked through existing inventories and adjusted to new input cost baselines.

This sectoral nuance is vital for evaluating exposure. Firms with high inventory turnover or those heavily reliant on imported inputs are more likely to exhibit the sticky pricing behavior currently reflected in the 3.6% aggregate forecast. If the historical relationship between these expectations and realized core CPI persists, the current reading implies that core inflation will remain above the Federal Reserve’s target for the remainder of the year.

Comparative Accuracy and Forecast Risk

When assessing the reliability of these expectations, the root mean-squared forecast error (RMSE) provides a useful framework. Over the 2007–2025 period, CFO expectations demonstrated an RMSE of 0.92, outperforming both the Michigan Survey of Consumers (1.08) and the SPF (1.16). This superior accuracy suggests that the CFO Survey is a more reliable proxy for near-term core CPI outcomes than consensus professional forecasts.

However, the current environment presents unique risks. The survey was conducted during a period of heightened geopolitical tension in the Middle East, which directly impacted energy costs. If crude oil prices remain volatile, the 3.6% expectation may be subject to upward revision in subsequent quarters. Conversely, if demand-side cooling accelerates, the gap between firm-level pricing plans and realized inflation could widen, as companies find themselves unable to pass through the costs they currently anticipate.

Market Implications for Financial Services

For those monitoring the financial sector, including SAN stock page and WELL stock page, the persistence of elevated price growth expectations is a double-edged sword. While higher nominal price growth can support revenue, it also complicates the interest rate environment by keeping upward pressure on core inflation. The current data suggests that the path to the 2% target remains obstructed by firm-level pricing decisions that have not yet aligned with a lower-inflation regime. Investors should look for future survey waves to see if the 3.6% expectation begins to converge toward the SPF’s 2.9% forecast or if it remains anchored at higher levels, which would necessitate a more cautious outlook on monetary policy easing.