BofA Predicts Three Federal Reserve Rate Hikes in 2026 as Hawkish Outlook Gains Strength

BY EMMANUEL OGBONNA

Bank of America Global Research has forecast that the U.S. Federal Reserve will raise interest rates three times in 2026, marking one of the most aggressive outlooks among major Wall Street institutions as expectations grow that the central bank will take a tougher stance on inflation under its new leadership.

In a research note released Monday, BofA said it now expects the Federal Reserve to increase its benchmark interest rate by a total of 75 basis points this year, with quarter-point hikes anticipated in September, October, and December. The revised forecast represents a significant shift from the firm’s previous expectation that policymakers would leave interest rates unchanged throughout 2026.

The updated projection reflects BofA’s belief that the U.S. economy has remained more resilient than previously anticipated, supported by solid economic growth, a strong labor market, and persistent inflationary pressures. Analysts also pointed to the policy direction signaled by new Federal Reserve Chair Kevin Warsh, whose recent comments have reinforced expectations that the central bank is prepared to prioritize inflation control even if it requires tighter monetary policy.

The investment bank’s forecast stands in sharp contrast to the broader consensus across Wall Street, where most major financial institutions continue to expect the Federal Reserve to keep rates steady or make only limited adjustments this year. While many economists believe inflation will gradually ease, BofA argues that price pressures are likely to remain stubborn enough to justify additional rate increases.

Earlier this month, the Federal Reserve voted to leave its benchmark interest rate unchanged. However, the central bank’s latest economic projections revealed a more hawkish outlook than many investors had anticipated. Nearly half of Federal Reserve policymakers now expect interest rates to move higher before the end of the year, reflecting growing confidence in the strength of the U.S. economy and