Danske Bank revises Fed rate expectations, forecasting 25 basis point hikes in both December and next March
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Golden Ten Data reported on May 21 that Antti Ilvonen, Senior Analyst at Danske Bank, stated in a report that the bank has revised its expectations for the Federal Reserve. It now anticipates that the next policy adjustments will take place in December 2026 and March 2027, with interest rate hikes of 25 basis points each. Previously, Danske Bank had expected the Federal Reserve to cut rates to a range of 3.00%-3.25%. This adjustment in forecast is based on an improvement in US nominal growth prospects, which are stronger than expected. "Importantly, this shift is not solely driven by the Iran war; we believe demand factors are fueling a more structural inflation," Ilvonen noted. Meanwhile, downside risks in the labor market have eased, AI-driven investment demand continues to propel real growth and inflation, and fiscal policy is moving in a more expansionary direction.
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