Bank of America Sees 75 bps of Hikes in 2026, Cuts Delayed to 2028
BAC•Bank of America Global Research forecasts three 25-basis-point rate hikes totaling 75 bps in 2026, taking the federal funds rate to 4.25–4.50% and delaying any cuts until 2028. They cite sticky inflation and a resilient labor market under Fed Chair Kevin Warsh, implying sustained interest margins but softer loan growth.
1. Forecast Overview
Bank of America Global Research expects three 25-basis-point rate hikes in September, October and December 2026, lifting the federal funds rate to 4.25–4.50%. The firm anticipates rates on hold through 2027 and no cuts until 2028.
2. Drivers of Hawkish Outlook
The forecast hinges on persistent inflation pressures and a robust labor market, with Fed Chair Kevin Warsh signaling a more hawkish stance in recent projections. Analysts note the Fed’s reaction function has shifted toward prioritizing price stability over employment metrics.
3. Market and Peer Comparison
Markets currently price in roughly 42 basis points of hikes in 2026, contrasting with Bank of America’s 75 basis-point call. Only a minority of brokerages share this hawkish view, highlighting the divergence across Wall Street.
4. Implications for Bank of America
Sustained higher rates could bolster Bank of America’s net interest income through elevated lending spreads. However, prolonged rate hikes may dampen demand for rate-sensitive loans and weigh on overall credit growth.
