Natixis Economist Forecasts One More Fed Rate Hike in December

The Quick Take

• Natixis chief US economist Christopher Hodge forecasts one additional Federal Reserve rate hike in December, a minority view against broad consensus expectations for a pause
• Hodge sees core CPI softening slightly while higher energy prices, labour market weakness, and housing cost pressures shape Fed policy calculus
• A December hike would push Treasury yields higher and increase pressure on emerging market currencies including the Indian rupee and Brazilian real

Natixis chief US economist Christopher Hodge is forecasting one additional Federal Reserve rate hike in December, projecting that core CPI will come in slightly softer than consensus estimates while inflation continues to ease. Hodge's call stands as a minority view in an environment where broader market expectations have shifted toward a prolonged pause or potential easing cycle, making the Natixis forecast a notable outlier that frames downside risk for rate-sensitive assets. Higher energy prices, potential labour market softening, and persistent housing cost pressures are the key variables Hodge identifies as shaping the Fed's eventual decision in the fourth quarter.

A December Federal Reserve rate hike would carry broad consequences for global financial markets: US Treasury yields would be pushed higher, reinforcing the relative attractiveness of cash and short-duration bonds over equities and compressing valuations in rate-sensitive sectors including real estate, utilities, and long-duration growth technology. Emerging market currencies — particularly the Indian rupee, Indonesian rupiah, and Brazilian real — typically face depreciation pressure when the Fed tightens while other major central banks hold steady, as the yield differential widens in favour of dollar-denominated assets. Sustained capital outflows from emerging markets would add a secondary drag to equity valuations in these regions.

The critical forward signal is the November core CPI release: if inflation softens as Hodge expects, the Fed may find sufficient justification to pause through December, validating the consensus easing narrative. A hotter-than-expected print, however, would align with Hodge's hike forecast and trigger rapid repricing of rate expectations across asset classes. The December FOMC meeting and updated dot-plot projections represent the highest-conviction resolution point for this uncertainty. Labour market data — particularly non-farm payrolls and initial jobless claims — is the second key variable: any deterioration in employment would reduce the Fed's motivation to tighten further even with sticky residual inflation.

Synthesized from 1 source.