BofA adds January Fed hike to forecast, says quarterly pace no longer enough
TLT•BofA Global Research expects an additional 25-basis-point Fed rate hike in January 2027, on top of forecast increases in December and March, after October inflation came in hotter than expected.
1. BofA revises forecast
BofA Global Research now expects the Federal Reserve to raise rates by 25 basis points in January 2027, in addition to previously forecast hikes in December and March. Its economists said October’s hotter-than-expected CPI reading left the Fed further behind on inflation and that quarterly increases may no longer be enough.
2. Markets price December move
After a third consecutive monthly inflation surprise, markets priced an 89.7% chance of a 25-basis-point December hike and a 10.3% chance of a 50-basis-point move, per CME FedWatch Tool. The Fed raised its benchmark rate to a 3.75%-4.00% range in September, its first increase in three years.
3. Risks to the outlook
BofA strategists said the Fed might delay or skip its final hike if data weaken or financial conditions tighten significantly, while a surge in wage inflation or large annual price resets could push the policy rate above 5%. Goldman Sachs forecast hikes in December and March, while Deutsche Bank expected increases at each of the next three Fed meetings.
