BNY expects one more Fed rate hike in December, sees uncertainty around 2027 path

Bank of New York Mellon said it expects the U.S. Federal Reserve to raise rates once more in December, while cautioning that the longer-term path implied by market pricing remains far less certain. In a report cited by BlockBeats on Sept. 22, BNY Americas macro strategist John Velis said he is not convinced the Fed will be able to deliver as many hikes by 2027 as markets have priced in. Velis said the answer depends on how effective tighter policy proves under the current inflation shock. He added that the outlook is tied in large part to developments in the Middle East, where visibility remains limited. According to his view, any easing in regional tensions, along with a resulting decline in oil prices, could shift how both markets and the Fed assess the policy outlook. At the same time, Velis warned against anchoring the policy path to a scenario in which conditions first worsen and then improve. His comments point to a near-term expectation for one additional hike, but a much less settled view on how far tightening can extend over the following years.