DEUTSCHE BANK EXPECTS US FED TO DELIVER AN ADDITIONAL 25 BP RATE HIKE IN JANUARY 2027 VS PRIOR FORECAST OF RATE HIKES IN DECEMBER AND MARCH

Deutsche Bank now expects the Federal Reserve to deliver an additional 25 basis point rate hike in January 2027, shifting its timing from its prior forecast of hikes in December and March. The revision reflects a change in the expected path of policy tightening rather than a change in the destination of the rate cycle, with the bank pushing the adjustment later into the year. The transmission channel runs through the front end of the Treasury curve and the rate differential against other major central banks, since a delayed-but-still-present hike sustains a higher expected policy rate for longer and supports the dollar relative to currencies whose policy paths are easing. Short-dated Treasuries and interest-rate-sensitive segments of equities, particularly rate-sensitive growth and housing-linked names, are most directly exposed to repricing, while dollar pairs against funding-sensitive emerging market currencies face the sharpest sensitivity to the timing shift. Traders should watch the upcoming core PCE inflation release and the Federal Reserve's next dot plot for signals on whether the inflation trajectory supports or undercuts a January 2027 move.

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