Bank of America predicts three Fed rate hikes in 2026, sparking market concern

Bank of America’s Global Research unit now forecasts three 25‑basis‑point Federal Reserve rate increases in September, October and December 2026, lifting the policy rate to a 4.25 %‑4.5 % range. The outlook marks a sharp departure from the market’s prevailing view that rates will stay unchanged through the year. Deutsche Bank issued a similar, though less aggressive, projection of two hikes in September and December.

The shift follows the June FOMC meeting, where the Fed kept the target range at 3.5 %‑3.75 % but signaled a more hawkish stance under new chair Kevin Warsh. Analysts note that higher rates would keep mortgage, credit‑card and corporate‑borrowing costs elevated, pressure bond markets, and increase the appeal of safe‑haven Treasury yields. The forecast also weighed on risk assets: Bitcoin fell to about $62,000 after the announcement, and other cryptocurrencies faced downward pressure.

Commentary pieces differ on plausibility. Some argue that three hikes in a single year are excessive given recent declines in oil prices and the end of the Iran conflict, while others cite strong labour‑market data and persistent core inflation as justification. Nomura’s chief strategist warned that the Fed’s June decision to hold rates could become a turning point for the credit cycle and AI‑driven growth, implying a longer‑term tightening path. Warsh’s reform agenda is also expected to reduce long‑term Treasury volatility.

Overall, the new forecasts suggest a more restrictive monetary environment for the United States, with ripple effects across equities, bonds, and crypto markets.