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Investors take heed: while many economists -- and the Federal Reserve itself -- see the U.S. interest-rate hiking cycle at only about half-done, it may instead be closer to the end.

That’s the implication from a study by quantitative analysts at Societe Generale SA. Their findings suggest there may be only three hikes to go before the Fed comes to a halt, at 2.5 percent for the upper bound of the policy target. The calculation is based on the so-called shadow rate, which aims to incorporate the effect of the Fed’s past quantitative easing, and suggests that tightening is further along than nominal interest rates suggest.

“Our analysis shows that we might be at the late stage in the ongoing rate cycle,” the strategists led by Andrew Lapthorne wrote in a note Tuesday. “Typically a rate-cycle peak is followed by recession, with an average about six months in between,” and it calls for a “major repositioning in investment portfolios,” they wrote.

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Source: SocGen

The most recent Fed “dot-plot” projections suggest the central bank will still be raising rates in 2020, in order to cool an overheating economy and avoid a recession. Fed officials signaled this week[1] they’re ready to increase the benchmark again at their June meeting, though sent no clear message on the number of moves thereafter in 2018.

The shadow rate, which is an estimate of the implicit underlying rate in a situation where the Fed was also pursuing quantitative easing and forward guidance, hit its bottom in May 2014, at about minus 3 percent. As the Fed ended QE, it steadily climbed starting in late 2014, reaching zero by December 2015.

Add the Fed’s nominal rate hikes so far -- about...

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