Danske Bank Revises Fed Rate Hike Expectations for 2026 and 2027

Danske Bank has revised its expectations for the U.S. Federal Reserve's policy adjustments, according to a report by senior analyst Antti Ilvonen on May 21. The bank now anticipates that the next policy changes will occur in December 2026 and March 2027, with a 25 basis point rate hike each time. Previously, Danske Bank had forecasted a rate cut to 3.00%-3.25%. This adjustment is based on an improved outlook for U.S. nominal growth, which is stronger than initially expected. According to Jin10, Ilvonen emphasized that this shift is not solely driven by the Iran war, as demand factors are contributing to more structural inflation. Meanwhile, the downside risks in the labor market have eased, and AI-driven investment demand continues to boost real growth and inflation, while fiscal policy is trending towards an expansionary direction.