Commerzbank’s Bernd Weidensteiner argues that despite market expectations for further Fed tightening, falling Oil and gasoline prices should lower U.S. inflation and ease pressure for hikes. The bank forecasts no rate increases, with cuts possible from summer 2027, and expects the Dollar to come under renewed pressure once the Iran conflict ends and pronounced easing begins.

No hikes, cuts penciled in for 2027

"Consumer prices are therefore likely to be even lower in June than in May. Significantly declining inflation rates in the coming months would reduce the pressure to deliver rate hikes."

"We continue to expect that the Fed will not raise interest rates. In the summer of 2027, with inflation then significantly lower, interest rate cuts may even be possible again, even though this is no longer being discussed at all in the markets."

"The dollar is likely to be under pressure again after the end of the war with Iran because the Fed is unlikely to raise rates as markets have priced in."

"Rather, the Fed is likely to embark on pronounced and ultimately excessive interest rate cuts again in 2027, also because of the political pressure."

"Furthermore, the dollar is vulnerable because it is significantly overvalued based on purchasing power parity."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)