Bank of America Forecasts Three 25bp Fed Rate Hikes in September, October, December 2026

According to Bank of America, the Federal Reserve will raise interest rates by 25 basis points in September, October, and December 2026, lifting the federal funds rate to 4.25%-4.5%. This marks a sharp reversal from the bank's forecast issued the prior week, when it projected rates would remain unchanged through 2026.

BofA Economist Aditya Bhave stated the Fed's inflation problem has become "unambiguously worse." Core PCE inflation could reach 3.5% in May 2026, nearly 70 basis points higher than a year prior. Housing-driven disinflation has largely run its course, while core services inflation remains "very sticky." New Fed Chair Kevin Warsh, who took office on June 17, has signaled a hawkish stance, emphasizing "price stability" at his first FOMC meeting.