Shenwan Hongyuan: Amid Q4 Inflation Stickiness, a 25bp Rate Hike in December Remains the Base Case
nashnova research
Shenwan Hongyuan keeps a December 25 bp rate hike as its base case, arguing that Q4 inflation is entering a "plateau phase" and two dissenting votes expose lingering tightening pressure inside the FOMC.
What signal did the October meeting send?
The Fed held rates steady on October 28, but Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, favoring a 25 bp hike.
This means → two dissents show the committee still harbors tightening impulses — the hiking window is not shut.
The statement turned more upbeat on the economy, yet shifted its policy rationale from "emphasizing the effect of hikes" to "waiting for more information." Chair Kevin Warsh's press-conference remarks were read by markets as a dovish signal.
What does the FOMC meeting-format overhaul mean?
Shenwan Hongyuan calls the meeting-format overhaul the biggest marginal change: starting 2027, one of eight annual meetings will focus solely on long-run policy strategy — no vote, no statement. In 2028, that rises to two.
In plain terms = traditional rate-setting meetings drop to 7 in 2027 and 6 in 2028, raising the decision weight of each remaining session.
Warsh also noted the U.S. economy is strong, AI investment is spreading into traditional industries, and Q3 growth may top 3% — but stressed that strong growth does not necessarily push up inflation.
Will the Fed actually hike in December?
Warsh said explicitly he does not support forward guidance in normal times. He neither confirmed nor denied a December hike — but did not dispute it being the "consensus" among most members.
This means → the Fed is keeping the suspense alive until the last moment; October inflation data will be the critical checkpoint.
Why is Q4 inflation "plateauing"?
Shenwan Hongyuan attributes Q4 inflation stickiness mainly to base effects and elevated oil prices; Warsh acknowledged energy prices have risen again in recent weeks.
The committee's "wait-and-see" camp is not dovish — in plain terms = they do not oppose hiking; they just want more data before acting.
If inflation stays firm, employment holds steady, and markets price in a likely hike, a December rate increase remains the base case.
How far along is the tightening cycle?
Shenwan Hongyuan frames the current phase as the "first half" of tightening — compensatory hikes (returning rates from too-low levels back to neutral), characterized by a follow-the-data, discretionary approach.
Whether the "second half" — genuine restrictive tightening — begins depends on latent inflation-reversal risks such as AI capex expansion and wage growth.
This reflects a view that, with medium-to-long-term inflation expectations anchored, "second-half" hikes remain a medium-term tail risk, not the base path.
What risks could break the base case?
Shenwan Hongyuan flags three risks: oil prices rising above expectations, a hawkish pivot by Warsh, and a sharper-than-expected U.S. slowdown.
This means → if oil keeps climbing or Warsh turns more hawkish, the hiking pace could accelerate beyond the base case; conversely, an economic stall could pause hikes entirely.
The nearest validation window: whether October inflation data sustains its strength.
市场有风险，内容仅供研究参考，不构成投资建议。