BofA Sees Two More Rate Hikes in 2026, Contradicting Market Expectations

Bank of America is predicting two more interest rate hikes in 2026, contrary to market expectations. The bank points out that inflation remains stubborn at 3.4% year-over-year over the last two months.

The Fed's hike in September was seen as a political challenge for Chair Kevin Warsh, but it has become increasingly evident that hikes are now considered an opportunity to demonstrate his independence and credibility.

Warsh warned of inflationary pressure due to high commodity prices and signaled a return to 2% inflation, which economists see as a hawkish stance. This leads many to believe that the hiking cycle is not yet complete.