WASHINGTON, Dec 17 (Reuters) - U.S. corporate finance chiefs continue to cite tariffs as a top concern and on average see prices rising more than 4% next year, according to a survey released on Wednesday that may add to Federal Reserve concerns that current price pressures will keep it from reaching its 2% inflation target anytime soon.
"Businesses definitely see their input costs higher than they were before, and to the extent possible they're going to try to preserve their margins. And to do that, there's going to be upward pressure on prices," Atlanta Fed President Raphael Bostic said in comments ahead of the release of the quarterly survey of chief financial officers, one of several the Atlanta Fed helps field that have a national scope.
"The responses we're getting suggest that those pressures will sustain...well into 2026. So that combination of things has me much more concerned about how inflation will evolve over the next six to 12 months."
The Fed on Thursday will receive its first official update on inflation since the release nearly two months ago of consumer price data for September, a span that has left officials largely in the dark about whether they have or have not made progress recently in restoring their 2% inflation target after roughly five years above it. The most recent data showed inflation measured by the Fed's preferred Personal Consumption Expenditures price index running at a 2.8% annual rate.
Officials are deeply split over how much risk is posed by inflation at the moment, with Federal Reserve Governor Christopher Waller arguing at an appearance in New York on Wednesday that he sees little chance inflation will accelerate from here and a high likelihood it will begin to fall early in 2026 as the impact of recent tariff increases begins to wane and given little pressure on wages due to a weakening labor market. In the most recent jobs report, issued on Tuesday, the Bureau of Labor Statistics said the unemployment rate in November hit a more than four-year high of 4.6%.
"I am not particularly worried about inflation. It's above target but I believe...it'll start coming down the next three to four months," Waller said, while the slowing pace of job growth meant the Fed could continue reducing interest rates "at a moderate pace."
The Fed cut its policy rate last week for the third consecutive meeting, but indicated a likely pause before any further reductions. The move drew split dissents, with Fed Governor Stephen Miran arguing in favor of a larger half-point cut, and two regional bank presidents opposing any further reduction, a position shared by Bostic, who does not have a vote on interest rates this year.
In the absence of data during the government shutdown in October and November, surveys have taken on elevated importance for some Fed officials as an alternate way to gauge the economy's direction.
The survey of 548 chief financial officers, spanning firms with from one to more than 1,000 employees and conducted from November 11 to December 1 by the Federal Reserve banks of Richmond and Atlanta in conjunction with Duke University's Fuqua School of Business, showed overall confidence dropping for both their own companies and for the U.S. economy as a whole. An "optimism" index for the U.S. as a whole dipped to 60.2 on a scale of 100 from 62.9 in the third quarter and also below its recent high of 66 at the end of 2024 following President Donald Trump's election to his current term.
The finding contrasts with a Deloitte poll of 200 CFOs from large firms, all with at least a billion dollars in revenue, that found overall confidence among executives had jumped in the fourth quarter to its highest since 2021 as the recovery from the COVID-19 pandemic was gaining steam. The poll did not ask about company pricing expectations, but more than half of the executives cited "cost management" as their toughest internal problem, while "inflation" was considered the second most pressing external problem, mentioned by more than half of those polled.
The overall outlook in the Fed survey is for both modest job and economic growth for 2026, with the median company expecting to boost employment by 1.7% in 2026, similar to other recent versions of the poll, and the economy expected to grow at about a 1.9% annual rate. Fewer than half of firms, at 40%, said they were hiring for new positions, while just under 20% said they were not hiring at all and about 9% said they anticipated layoffs.
Though tariff and trade risks have abated since the survey found record levels of concern in the second quarter of the year, when nearly 40% of respondents cited that as their most pressing issue, it still tops the list as finance chiefs anticipate significant price increases next year.
The average 4.2% expected rise in prices was just shy of the increase expected in unit costs; revenue growth on average was seen at close to 8%, slightly above the increase expected for this year.
In economic projections issued last week, Fed policymakers at the median anticipated inflation slowing in 2026 to within half a percentage point of the desired level.
In prior surveys, "we learned that CFOs expected the upward pressure from tariffs on prices to continue into 2026,” said John Graham, a Duke Fuqua School of Business finance professor and the academic director of the survey. “In this quarter’s survey, we find evidence of continued high price growth," he said, with half of firms anticipating price hikes of 3.5% or more.
Reporting by Howard Schneider; Editing by Andrea Ricci
