Société Générale Raises Fed Rate Hike Outlook to Three Times

Société Générale has raised its outlook for interest rate hikes by the U.S. Federal Reserve (Fed) to three times, with increases of 25 basis points expected in September, December, and March 2027. Jan Groen, the chief economist for Société Générale in the U.S., stated that concerns about persistent inflation and high price growth are increasing, reducing the necessity to maintain interest rates at current levels. He emphasized that the time has come to change the outlook in favor of rate hikes. Société Générale believes that price pressures have not sufficiently eased, citing core Personal Consumption Expenditures (PCE) and oil prices, as well as tariff shocks, which are contributing to rising inflation rates. Rate hikes act to suppress borrowing and spending, potentially leading to increased financing costs for companies and higher discount rates for risk assets. Manish Kabra, head of U.S. equity strategy at Société Générale, analyzed that the stock market tends to rebound after initial sluggishness during past rate hike cycles. He noted that the S&P 500 index averaged a 3% decline following the first rate hike but rose by an average of 4% six months later. The Fed's interest rate trajectory also impacts crypto investors, as Bitcoin and Ethereum are classified as risk assets sensitive to changes in rate expectations.

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