Federal Reserve May Hike Rates for First Time Under Powell

The Federal Reserve may be preparing for its first interest-rate hike in three years under Chair Jerome Powell's tenure, according to Natixis research team. Economists Christopher Hodge and Selin Aker expect a modest rate increase to help bring inflation down.

The current core CPI data is higher than market expectations, and policymakers' tolerance for short-term shocks has declined significantly. Although some factors driving inflation are beyond the Fed's control, persistently elevated inflation above the target level remains a problem the Fed must address.

Natixis believes that if inflationary pressures ease in the final quarter of 2026, this rate increase could be the only one in the current tightening cycle. The research team notes that the market has yet to fully decipher Governor Bullard's policy-response logic, but he has made it clear that bringing inflation down is the Federal Reserve's mandate.