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BofA forecasts 75 bps of rate hikes in 2026 on labour market resilience, new Fed chair
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BofA forecasts 75 bps of rate hikes in 2026 on labour market resilience, new Fed chair
Jun 22, 2026 4:50 AM

June 22 (Reuters) - BofA Global Research expects the Federal Reserve to hike interest rates by 75 basis points in 2026, it said on Monday, citing resilient economic data and rising expectations of a hawkish Fed under new Chair Kevin Warsh.

The brokerage expects the U.S. central bank to raise rates in September, October, and December, compared with its prior forecast for no change this year.

BofA's view is contrary to current 2026 outlooks of top Wall Street brokerages and comes after the Fed left its benchmark rate unchanged earlier this month, even as almost half of Fed policymakers indicated that they now expect rates to rise this year.

The policymakers' more hawkish outlook is accompanied by strength in the labour market and elevated inflation concerns.

"June Summary of Projections and Warsh's comments indicate that the Fed's reaction function is much more hawkish than we thought," analysts at BofA said in a note.

In contrast to BofA's call, markets are pricing in 42 bps of hikes in 2026, according to LSEG data.

After three rate hikes this year, BofA analysts expect the central bank to keep interest rates on hold in 2027.

"Inflation is likely to remain sticky, keeping the real policy rate from becoming overly restrictive," they said.

Brokerages including BNP Paribas and Macquarie are also among the minority that expect the central bank to start hiking rates this year.

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