Lates News

The American asset management company PGIM holds a nuanced view that the Federal Reserve will raise interest rates three times this year to curb overheating of the economy and then reverse the rate hikes in 2027. The company had previously predicted in April that the Fed would cut rates this year. PGIM states that the U.S. economy is "exceptionally strong" and inflation remains persistently high, necessitating new policy responses. Given this backdrop, and considering the Fed's failure to reach its 2% target for five consecutive years, PGIM expects the Fed to raise rates three times this year to enhance its credibility and anchor inflation expectations. PGIM says, "If rate hikes are described as 'precautionary' measures to address supply-side inflation and recent volatility in long-term government bonds, Washington will receive political support." However, PGIM predicts that the Fed "will relatively quickly reverse these rate hikes, with three rate cuts in 2027, one rate cut in 2028, ultimately leading to a rate of 3.375% - lower than the current rate and possibly close to the neutral rate."