Nordea’s research team keeps its Federal Reserve outlook unchanged, expecting one more rate hike this year and another in 2027 as US inflation remains above the 2% target and growth stays strong. The bank argues that elevated long-term Treasury yields mainly reflect robust nominal GDP growth and heavy capital demand, and do not yet look particularly restrictive for the US economy.

Fed path steady with strong data

“Inflation is still clearly above target, and the September CPI shows it moving up, not down.”

“Monetary policy still does not look restrictive enough for an economy in this shape.”

“Against that backdrop, long-term yields above 5% are not particularly restrictive.”

“We keep our Fed forecast unchanged. We still expect one more hike this year and another next year, with the risks tilted to the upside.”

“All in all, our view is unchanged. A strong economy and above-target inflation still call for tighter policy. We expect one more hike this year and another next year. Higher long-term yields do not change that call. They mostly reflect the same strong economy that keeps the Fed hiking.”