Just over half of the survey's 35 respondents of economists, fund managers and analysts, say the rate hike will come in September, down from 63 percent in the prior survey. And the forecast for the year-end Fed funds rate continues to decline, with the average now just 0.47 percent. Last July, Wall Street looked for a year-end funds rate just above 1 percent, showing how much tightening has been baked out of the market this year.
To be sure, 82 percent say the Fed will hike this year, but that's down from 92 percent in the prior survey. If the Fed doesn't hike, the main reason will be because of weak inflation, followed by weak U.S. growth and weakness overseas. Growth forecasts continue to be nudged down, with year-over-year GDP seen in 2016 at 2.7 percent, the fourth straight decline in the survey. For 2015, growth is seen at 2.4 percent, up from 2.25 percent in the prior survey but well below the 3 percent predicted as recently as December.
Read MoreWall Street sees Fed rate hike in 3Q: CNBC Fed survey
Behind the more pessimistic outlook is concern about global economic weakness, which tops the list for the fifth straight survey as the biggest threat to the U.S. recovery. Concern seems to be growing, with 29 percent of respondents worried about global growth, up from 22 percent in the previous month's survey. And it comes with greater concern about a U.S. recession: The probability of recession in the next 12 months rose to 17.4 percent, up from 15.1 percent in the previous survey. It's still low by historical standards, but the highest it's been since December 2013.
"There are two important issues that need to be resolved before the Fed will be comfortable … moving toward restraint. The first is inflation," said Hugh Johnson of Hugh Johnson Advisors. "The second issue is China."
Respondents to the CNBC survey nudged down their forecasts for the S&P for this year and next, but still see modest gains of 3 percent and 9 percent, respectively. There's trouble ahead: Only half of respondents think the stock market has discounted a rate hike, down from 60 percent in the prior survey. Several respondents expressed concern about earnings.
Read MoreCNBC Fed Survey: Smaller rate hike seen, and later
"Cautiousness in forward guidance among some of the large multinational companies outside of F/X impacts have caused us to become even more defensive in our recommendations for client positioning in the equity market,'' wrote John Roberts, director of research at Hilliard Lyons. "The length of the current bull market only adds to this caution and the potential for at least a modest pullback."
The survey was conducted July 23-24.