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Commerzbank expects Fed to hold rates at 3.50% to 3.75%

Commerzbank links any eventual shift toward cuts to a core PCE path nearing 2%, while warning that higher oil prices tied to the Persian Gulf escalation could keep headline inflation elevated.

Reported · Written up by our desk · Central Banks

Commerzbank’s Bernd Weidensteiner expects the Federal Reserve to keep its policy rate unchanged at the upcoming meeting, with the target range remaining at 3.50% to 3.75%, while the bank assesses whether further hikes would be needed if inflation does not cool.

The baseline scenario assumes the core Personal Consumption Expenditures, or PCE, Price Index slows toward a 2% track, which would allow the Fed to avoid tightening further and potentially begin cutting rates from mid-2027, according to FXStreet.

Weidensteiner also points to upside inflation risks from energy prices, saying an escalation in the Persian Gulf has pushed oil higher and could delay the drop in headline inflation during the summer months, raising the risk of second-round effects.

FXStreet notes that the Fed would likely seek more clarity on inflation trends before considering any hike, which supports the view that the target range would be left at 3.50% to 3.75% next week.

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