Bank of America has announced its expectation that the U.S. Federal Reserve will raise interest rates three times in 2026. This projection contrasts with the Fed’s current pause in rate changes, following its decision to keep the target range steady at its recent June meeting. The announcement aligns with recent hawkish indications from Fed officials regarding the monetary policy path for 2026. While the Fed’s own projections indicated that nine out of 19 policymakers anticipated at least one rate hike by the end of 2026, Bank of America’s outlook suggests a more aggressive approach.
Key Takeaways
- Bank of America’s forecast of three rate hikes in 2026 appears consistent with a shift towards a hawkish monetary policy by the Fed.
- Current market pricing suggests participants view the likelihood of no rate cuts in 2026 as high, with the “no Fed rate cuts” market currently priced at 80.4% YES.
- The expectation of multiple rate hikes could indicate that markets view the Fed’s policy as supportive of economic tightening in 2026.
What to Watch
Market participants will be closely monitoring the Fed’s communication for any changes in its monetary policy stance, particularly as it relates to interest rate decisions and economic indicators such as inflation and employment data. The upcoming Federal Open Market Committee (FOMC) meetings in July, September, and October will be key events, with any shift in guidance potentially impacting market expectations. Additionally, speeches from Fed Chair Jerome Powell and other officials could provide further insights into the Fed’s policy trajectory for the remainder of the year and beyond.
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