Bank of America expects three Fed rate hikes this year

Bank of America has announced its expectation of three interest rate hikes by the Federal Reserve this year, projecting a total of 75 basis points of tightening. The revised forecast contrasts with the bank’s previous outlook of no rate changes in 2026. The anticipated hikes are scheduled for September, October, and December, which would elevate the federal funds target range to 4.25%–4.50%. This outlook aligns with the Fed’s June 2026 projections, where the median year-end estimate was already leaning toward at least one increase, suggesting a shift towards a more aggressive monetary policy stance.

Key Takeaways

• Bank of America’s projection suggests a more aggressive monetary policy stance than previously anticipated, indicating potential rate hikes in the coming months.
• Market pricing appears to be adjusting to the possibility of rate increases, as reflected in the shift in odds for related prediction markets.
• The revised forecast is among the more aggressive in the market, potentially influencing other financial institutions’ expectations and market sentiment.

What to Watch

The Federal Reserve’s upcoming meetings in September, October, and December will be critical in confirming whether the projected rate hikes materialize. Observers will also be attentive to economic indicators such as inflation rates and employment data, which could influence future Fed decisions. Any statements from key Fed officials, including Chairman Kevin Warsh, could provide further insight into the likelihood of rate hikes and their potential impact on the markets.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.