Castle Securities predicts the Federal Reserve will raise interest rates by 75 basis points within the year, with the tightening cycle potentially starting as early as September.

BlockBeats news, June 17 — Frank Flight, Head of Macro Strategy at Castle Securities, expects that the Federal Reserve may begin a new round of rate hikes within the year, with a total increase of 75 basis points, possibly starting as early as September.

The report states that, amid strengthening persistence and diffusion of inflation, multiple factors are reinforcing upward price pressure, including loose financial conditions, supply chain disruptions, a rebound in the labor market, and a surge in investment related to artificial intelligence. Even if easing tensions in the Middle East recently have helped pull oil prices lower, prior conflicts have caused inflation expectations to become “structurally entrenched.”

Flight expects that, in the Federal Reserve’s first policy meeting, the newly appointed chair, Kevin Wirth, will release a hawkish signal, which may reverse the market’s prior expectations of a rate cut in September. He also predicts that September, December, and the beginning of 2027 could all become potential windows for rate hikes.

On the policy path, Castle Securities believes that the June policy meeting may remove wording that indicates a bias toward easing and strengthen tightening signals by updating the dot plot. It is expected that multiple officials will raise inflation expectations to more than 3%, while also lowering unemployment rate forecasts.

Based on calculations using the Taylor rule, the institution believes that the optimal policy path for the current economic mix corresponds to a cumulative increase of 75 basis points within the year, with policy shift signals appearing as early as July at the earliest, laying the groundwork for subsequent rate hikes.

In addition, the latest survey from Duke University shows that most former Federal Reserve officials believe that, due to energy shocks and the continuing persistence of high inflation, the Federal Reserve will need to raise rates again within the year, although some respondents also point to the risk that the economy may weaken during the summer.