Fed Update: Strong Nominal Macro Warrants Tightening Bias

Danske Bank has pivoted its Fed call, now forecasting two 25bp rate hikes by March 2027 due to strong US nominal growth and AI-driven investment. The bank expects the Fed Funds Rate to be maintained at 4.00-4.25% throughout 2027.

Key Takeaways

• 1.Danske Bank has revised its Fed forecast, now expecting 25bp rate hikes in December 2026 and March 2027.
• 2.Structural demand-factors, specifically AI-driven investment, are fueling growth and inflationary cost pressures.
• 3.US fiscal policy is shifting towards an expansionary stance due to easing tariff policies and potential discretionary support.

Table of Contents

• Fed update: Strong nominal macro warrants tightening bias
• Our Fed call
• We think that the recent upshift in markets’ Fed pricing is justified by improving nominal macro-outlook
• Disclosures
• General disclaimer
• Disclaimer related to distribution in the United States
• Disclaimer related to distribution in the United Kingdom
• Disclaimer related to distribution in the European Economic Area

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