Bloomberg reported on June 15 that PGIM, the asset management arm of Prudential Financial, anticipates the Fed will raise interest rates three times in 2026, according to its outlook for the second half of the year.
Previously, PGIM had expected a rate cut until April, but it has now adjusted its forecast, citing an overheating U.S. economy as the primary scenario.
While recent oil price shocks have eased somewhat due to the potential resumption of Middle Eastern supply, PGIM noted that the U.S. economy remains robust and inflation is declining slowly, prompting the revision.
The Fed will hold its Federal Open Market Committee (FOMC) meeting on June 16-17. Market expectations suggest the Fed will maintain the current interest rate range of 3.5% to 3.75% during this meeting.
PGIM pointed out that the Fed has exceeded its 2% inflation target for over five years, which it believes will compel the central bank to raise rates to maintain institutional credibility and stabilize inflation expectations. However, the specific timing of the three expected rate hikes this year was not detailed.
This meeting will be the first monetary policy session chaired by Kevin Warsh, who took office last month. PGIM stated that if Warsh explains the rate hikes as a preventive measure against supply-side inflation pressures and volatility in the long-term Treasury market, it could alleviate political burdens.
PGIM forecasts that after raising rates three times this year, the Fed will cut rates three times in 2027 and make an additional cut in 2028, bringing the final rate to approximately 3.375%.
Market expectations are much more moderate than PGIM's. The derivatives market estimates a 70% chance of one rate hike occurring this year, with the most likely timing for this hike being the first quarter of next year.
* This article has been translated by AI.
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