BoA Forecasts 3 Fed Rate Hikes in 2026, Breaking From Cuts

Bank of America expects the Federal Reserve to raise interest rates three times in 2026, breaking sharply with the current easing cycle that markets have been pricing since late 2025. The call frames 2026 as a year of policy reversal rather than continued accommodation, with the cumulative impact of three hikes repricing the front end of the curve.

Why it matters

BoA's outlook runs counter to consensus and to the dot plot the Fed published in its most recent Summary of Economic Projections, which leaned toward gradual cuts through 2026. A pivot to three hikes assumes inflation re-accelerates or that labor market strength forces the Fed to lean against an overheating economy. Either way, the rate path embedded in markets today would need a sharp rethink.

Market impact

Three additional hikes would tighten financial conditions across the board. Crypto and growth equities, which have re-rated on the assumption of continued liquidity support, face the steepest adjustment. Rate-sensitive sectors, real estate, and small caps would also bear the brunt, while the US dollar and short-duration bonds would benefit. Spot BTC and ETH ETFs, which have anchored much of the institutional flow thesis on a dovish Fed, would see that bid tested if BoA's call proves directionally correct.