HSBC Analysts Predict Possible Return of Rate Hikes by 2026, Impacting Global Markets
In a recent note, HSBC analysts have highlighted the potential for rate hikes to return by 2026, despite the current easing of monetary policy by the Federal Reserve. This move comes after 14 months of steady rates and a 50 basis point cut, following similar actions by the ECB and other G10 central banks.
The note explains that while inflation is high but decreasing, and the labor market is cooling, allowing for looser monetary policy, uncertainties remain. Global economic conditions, political developments, and market volatility could all influence future Fed decisions.
The outcome of the 2026 U.S. presidential elections is identified as a key factor that could impact fiscal and monetary policies. The analysts present two potential scenarios - one involving fiscal tightening and rate cuts, and the other involving supply-side shocks leading to rate hikes.
They suggest that the latter scenario could force the Fed to raise rates, regardless of who is Fed Chair. However, they also acknowledge the possibility of the Fed already raising rates by 2026 due to a stronger-than-expected economic rebound.
In the event of a US hard landing in 2025, the Fed would likely continue lowering rates in 2026 if it appears they are behind the curve. These potential scenarios highlight the importance of staying informed and prepared for market fluctuations in the coming years.
Analysis:
This article discusses the potential for rate hikes to return by 2026, impacting global markets and financial policies. It emphasizes the importance of factors such as political developments, economic conditions, and market volatility in shaping future Fed decisions. Investors should stay informed and prepared for potential changes in monetary policy that could affect their investments and financial strategies.