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(Bloomberg) -- There is a risk the Federal Reserve has to raise interest rates next year given the inflationary policy platforms of both US presidential candidates, according to Mark Dowding, the chief investment officer at RBC BlueBay Asset Management.

Dowding is betting on that by positioning for US breakeven rates — a proxy of inflation expectations — to widen further. He also expects the US Treasury curve to steepen sharply as longer-maturity yields rise faster than shorter-term ones. That’s because he sees investors demanding higher premiums to compensate for the inflationary outlook, particularly if Donald Trump wins the election next month.

“I wouldn’t rule out at all the idea that we get one or two more cuts from the Fed,” Dowding told Bloomberg TV. “But if we do see an overtly more inflationary Trump with policies on tariffs, on clamping down on immigration that tighten the labor market and on delivering further fiscal stimulus, who’s not to say that in the middle of next year we could be talking about a Fed hike, not a Fed cut.”

Traders have aggressively scaled back expectations for Fed rate cuts after a series of recent data surprises pointed to a robust US economy. That has led to a recovery in inflation expectations, leading five-year breakeven rates to climb after they fell to the lowest since 2020 last month.

Dowding bought five-year US breakeven rates below 2 percentage points, and expects those to rise to 2.5 percentage points in coming months, he said in a separate interview. He thinks the yield spread between US two-year bonds and 30-year Treasuries could surge to 150 basis points, from around 35 basis points now, in “the fullness of time.”

His concern over the fiscal outlook comes as Republican nominee Trump and Kamala Harris are courting voters in key battleground states with an array of economic policies, including tax cuts.

Dowding said geopolitical tensions will also push energy prices higher. Oil futures are already up about 7% this month on nervousness about an escalation of hostilities in the Middle East, feeding into broader inflationary pressures.