Dive Brief:

• CFOs and finance executives across North America grew more confident in economic growth during the first quarter amid rising expectations that the Federal Reserve can curb inflation without causing a recession or widespread unemployment, according to results of a survey.
• The brightening outlook among CFOs for the second straight quarter “likely reflects growing optimism that the U.S. economy is on course for a ‘soft landing’ or perhaps no landing at all,” Institute of Management Accountants Research Director Susie Duong said. 
• Sustained growth “means we are likely to see less monetary easing by the Federal Reserve this year than investors expected a few months ago,” Duong said in a statement. IMA conducts the quarterly survey with the Association of Chartered Certified Accountants.

Dive Insight:

With the economy strong and inflation persistent, investors and economists since December have reduced forecasts for the number of quarter-point cuts to the Fed’s main interest rate this year from as many as six to just one or two.

Traders in interest rate futures on Friday saw 57% odds that the Fed after a policy meeting in July will hold the benchmark interest rate at the current range of 5.25% to 5.5%, compared with 44% odds on April 12, according to the CME FedWatch Tool.

The core personal consumption expenditures price index, the Fed’s preferred inflation measure, was likely 3.8% in March — the same rate as in February — and the three- and six-month measures of inflation exceed that level, Fed Chair Jerome Powell said on Tuesday. Core PCE excludes volatile food and energy prices.

At the same time, the consumer price index in March rose more than forecast for the third straight month. Big gains in transportation and shelter prices helped push up the CPI 0.4% in March and 3.5% on a 12-month basis, the Bureau of Labor Statistics said on April 10.

“You never want to make too much of any one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed,” Chicago Fed President Austan Goolsbee said Friday in remarks prepared for a discussion. “Progress on inflation has stalled.”

Goolsbee and Powell are among several central bank officials who recently have noted slowing progress this year in curbing price pressures to the Fed’s 2% target while voicing no urgency in reducing borrowing costs.

“Given the strength of the labor market and progress on easing inflation seen over a longer arc, I believe the Fed’s current restrictive monetary policy is appropriate,” Goolsbee said.

CFOs across North America ranked the category inflation/recession as their top “risk priority,” the ACCA and IMA found in the survey.

“We've said at the FOMC [Federal Open Market Committee] that we'll need greater confidence that inflation is moving sustainably toward 2% before it would be appropriate to ease policy,” Powell said Tuesday. “The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence.”

Solid gains in employment and robust expansion in gross domestic product may signal excessive economic growth, Goolsbee said. “We need to determine if this is a sign of overheating driving up inflation.”

GDP rose 3.4% during the fourth quarter, and the Atlanta Fed estimates 2.9% annualized GDP growth during Q1.

The International Monetary Fund on Tuesday upgraded its forecast for U.S. growth this year to 2.7% from its 2.1% projection in January, noting strong consumer spending and unexpectedly high job gains in recent months.

North American CFOs expect to see an increase in orders and capital expenditures in coming months, the ACCA and IMA found in their survey of 644 top financial executives worldwide from Feb. 20 until March 7.