BNP Paribas expects the Federal Reserve to raise interest rates three times by the first quarter of 2027

BNP Paribas stated in its quarterly outlook: "We expect the Federal Reserve's rates to continue rising through the first quarter of 2027, which aligns with our base scenario that the Fed will implement three rate hikes between September 2026 and January 2027." The expected rate hikes are driven by robust economic growth, persistent deficits, and a surge in ultra-large corporate issuances—all factors that should collectively push long-end yields higher and result in a flat yield curve. However, BNP Paribas analysts anticipate that as the small rate hike cycle peaks in the first quarter of 2027, the market will absorb concerns about the Fed's credibility, prompting yields to edge slightly lower from the second quarter of next year.