Bank of America Predicts Two More Federal Reserve Rate Hikes This Year

Bank of America (BofA) has maintained its forecast for two additional quarter-point interest rate hikes by the U.S. Federal Reserve in October and December 2026. This prediction follows a unanimous decision by the Fed to raise rates to a target range of 3.75% to 4.00% on September 16, 2026. BofA analysts argue that the current economic conditions, particularly strong consumer spending, leave the central bank with little choice but to continue tightening monetary policy.

Nominal consumer spending in the United States has increased by 6.3% over the past year, significantly surpassing the 5% threshold historically linked to above-target core inflation. BofA suggests that this robust spending level raises the risk of persistent inflation while decreasing the likelihood that further rate hikes will trigger a recession. If the Fed follows through with the anticipated hikes, the target range would rise to between 4.25% and 4.50%.

The bank's outlook aligns with recent signals from the Federal Reserve, where projections indicate that most officials expect at least one more rate increase this year. However, BofA's forecast goes beyond these projections, suggesting two hikes instead of one. The bank also highlighted potential risks, noting that ongoing supply shocks could force the Fed to choose between allowing inflation to overshoot or risking a hard economic landing.

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Source: KLEA News