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Fed seen as split, with core PCE data key to late-2026 hike odds

Societe Generale expects no Fed funds rate change this year, but says the risk of hikes could start as soon as the December FOMC meeting if core PCE moves as feared.

Reported · Written up by our desk · Central Banks

Societe Generale’s Jan Groen says the Federal Reserve remains divided, with a larger camp willing to keep policy on hold until core PCE inflation data in the second half of 2026 signals that the time for rate hikes has arrived.

Groen points to the minutes of the July FOMC meeting as reinforcing the same “divided hawkishness” message seen in June, with different degrees of hawkishness across the two camps.

In Groen’s view, the Fed is likely to keep the fed funds rate unchanged throughout 2026, but there is a sizeable risk of rate increases starting from the December FOMC meeting, conditional on the core PCE inflation outcomes.

The note also ties the market backdrop to the Fed, noting that the hawkish tone from recent FOMC minutes has helped stabilize the US dollar after a prior sell-off, with traders looking ahead to US data and other headline risk for further direction.

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