Deutsche Bank expects Fed rate hike in January 2027 after hot inflation data
TLT•Deutsche Bank expects the Federal Reserve to raise rates by 25 basis points in January 2027 after October CPI rose 0.4%, above economists’ 0.3% estimate. Traders are pricing in an almost 99% chance of a December hike.
1. Deutsche Bank forecast
Deutsche Bank said it expects an additional 25-basis-point rate hike in January 2027 after October inflation came in hotter than expected. The bank said the CPI data showed broad-based gains and reinforced concerns about persistent price pressures.
2. Inflation and rates
The CPI rose 0.4% in October, compared with economists’ 0.3% estimate, pushed up by higher food and accommodation costs. The federal funds rate is now in the 3.75% to 4% range. Traders are pricing in an almost 99% chance of a December hike.
3. Possible larger increase
Deutsche Bank previously expected the Fed to raise rates in December and March. Fed Governor Christopher Waller said policymakers should raise rates by at least 25 basis points next month, and consider a half-percentage-point increase if price pressures accelerate. Deutsche Bank said a 50-basis-point increase was not its base case, though it would not rule one out.
