Société Générale Forecasts Three Fed Rate Hikes in 2026–2027
nashnova research
Société Générale has shifted its base case to rate hikes, projecting the Fed will raise rates three times for a total of 75 basis points between September 2026 and March 2027. This means → the Wall Street consensus that the cutting cycle is over is giving way to a new debate: hikes.
Why did SocGen flip to a hike call?
SocGen chief U.S. economist Jan Groen issued a report on August 28 forecasting 25-basis-point hikes in September 2026, December 2026, and March 2027.
The trigger: Fed Chair Kevin Warsh's Jackson Hole speech explicitly flagged concern over persistently elevated inflation.
This means → SocGen believes the bar for standing pat is rising — doing nothing now requires a stronger case than hiking does.
Why isn't inflation coming down?
Groen cites two drivers. First, supercore PCE — services inflation excluding housing — remains structurally above pre-pandemic levels.
Second, rising oil prices and tariff shocks are stacking on top, compounding price pressure.
In plain terms = the "floor price" of services is higher than before COVID, and oil plus tariffs are piling on above that. Under pressure from both ends, inflation is unlikely to fade on its own.
What do the market and rival banks say?
The CME FedWatch tool prices a 64% probability of a September hike, with two hikes by December as the most likely scenario.
But the probability of three hikes by March 2027 is only about 27% — SocGen's call is more aggressive than the market consensus.
Morgan Stanley and JPMorgan remain skeptical of a September move. This reflects a clear split on Wall Street: SocGen sits at the hawkish end, while the two largest banks lean cautious.
What happens to stocks after a hike lands?
SocGen chief U.S. equity strategist Manish Kabra reviewed the data: the S&P 500 falls an average of 3% in the month after the first hike of a new cycle, but rises an average of 4% six months later.
The key risk is a yield-curve inversion — the 2-year Treasury yield rising above the 10-year — which typically signals the Fed is tightening too aggressively. Historically, such episodes have accompanied 20% equity drawdowns.
Kabra says he does not expect an inversion now and advises investors to buy the dip when the first hike hits. In plain terms = the initial shock is short-lived pain; as long as the curve does not invert, history says the market recovers within six months.
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