Federal Reserve: Divided hawks shape late-2026 hike risks – Societe Generale
Societe Generale’s Jan Groen highlights a divided Federal Reserve, with a larger ‘keep-on-hold’ camp waiting for core PCE inflation data in 2H 2026 before backing rate hikes.
Societe Generale's Jan Groen emphasizes the divided stance within the Federal Reserve, with a larger group of 'hawks' waiting until the second half of 2026 for core PCE inflation data before backing rate hikes. Groen anticipates the Fed maintaining the Fed funds rate at its current level throughout the year, but believes there is a significant risk of rate increases starting from the December FOMC meeting, contingent on core PCE inflation outcomes.
The July FOMC minutes reflect this divided hawkishness, with the majority of participants believing that policy tightening would be necessary if inflation does not decline. The outcome of monetary policy beyond the July meeting will be determined by data, particularly the strength of core inflation in August-October inflation reports.
A shift towards rate hikes will depend on the pace of core PCE inflation implied by these reports. Currently, there is a substantial risk that rate hikes will begin at the December FOMC meeting.
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