Wall Street should brace for fewer rate hikes, bullish bank analyst Dick Bove says 

Veteran bank analyst Richard Bove is dissenting from the Wall Street consensus over interest rate hikes. Why?

Donald Trump.

"I don't believe we're going to get two more increases this year, and then three in 2019," the Hilton Capital Management chief strategist said Monday on CNBC's "Trading Nation." "I don't think they [the Fed] should be increasing."

Bove predicts the Fed will slow its tightening pace, and it'll be bullish for financials.

"The increase in interest rates are finally filtering down to the depositor. ... We're finally reaching the point where they're putting enough pressure on the banking system that banks have got to jump the rate that they're paying on savings," he said. "If that continues to happen, that will squeeze bank margins."

The Federal Reserve has lifted rates seven times since December 2016. Bove believes the Street will see another hike in September. However, he believes a December hike is unlikely.

"I don't think the president wants it to happen," Bove said.

Even though the Federal Reserve is an independent agency, Bove contends Trump is a critical factor that the Street is missing when it comes to policy. Since Trump appoints Fed board members, central bank policymakers won't want to disappoint him, according to Bove.

"By the end of this year, there could be six of the seven board members of the Fed put there by the president," Bove said. "The president doesn't want to see another 150 basis point increase in the federal funds rate because it's extremely costly to the U.S. government given the size of our deficit."

Bank stocks have been largely hugging the flat line this year. But over the past month with second quarter earnings underway, they picked up some ground — rallying more then 2.5 percent.

"If the Fed backs off, as I'm assuming that they will, then the margins of the banks will stay relatively high," Bove said.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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