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Santander raises Fed rate hike forecast, sees 25bp in December and March

Santander’s US chief economist Stephen Stanley raised his Federal Reserve rate-hike forecast to 25 basis points in both December and March, citing intensifying inflation pressures. He had previously expected a single December hike and no action in 2027. Stanley said the revision reflects strong growth, broadening price pressures, a higher estimate of the neutral policy stance at roughly 3.5%, and recent Fed commentary on input-cost pass-through.

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AI take

The revision matters less for its headline call than for the reasoning: a higher neutral-rate estimate and broadening price pressures imply the policy path may not be as short as markets assumed. That has direct bearing on rate-sensitive assets, including crypto and tokenized RWAs, which have leaned on the expectation of a peaking cycle. The open question is whether other forecasters converge on Stanley's view or treat it as an outlier, and whether Fed commentary continues to emphasize input-cost pass-through.

Generated by AI for reference only.

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