PGIM, in a dissenting view, expects the Fed to raise rates three times this year
to curb an overheating US economy, then reverse course with three cuts in 2027
and a further cut in 2028, bringing the policy rate to 3.375% — below current
levels and near neutral. The firm, which in April had forecast cuts this year,
cites an "unusually strong" US economy, persistently high inflation and five
years of missing the Fed's 2% target as the rationale for pre-emptive hikes to
shore up credibility and anchor inflation expectations. PGIM adds that framing
hikes as preventive against supply-side inflation and recent long-term Treasury
volatility would help secure political support.
