Analysts at Bank of America now expect the Federal Reserve to raise its benchmark interest rate twice more before the end of 2026, a forecast that signals continued concern about inflation even as the economy shows signs of cooling.
Bank of America’s economic research team has put forward a forecast calling for two additional rate increases from the Federal Reserve before 2026 draws to a close. The projection suggests that, in their view, the central bank’s work to bring inflation fully under control is not yet finished.
The Federal Reserve sets a target range for the federal funds rate — the overnight rate banks charge each other to borrow money. When the Fed raises that rate, borrowing costs rise across the economy, touching everything from mortgages and car loans to corporate debt. The goal is to slow spending and investment just enough to take pressure off prices.
If the Bank of America forecast proves correct, consumers and businesses should expect credit to remain relatively expensive into the new year. Higher rates for longer tend to weigh on housing markets, squeeze profit margins for companies carrying heavy debt loads, and can slow hiring as firms become more cautious about expansion.
Bond markets typically react quickly to revised rate expectations. A credible forecast for more hikes usually pushes yields on shorter-term Treasury notes higher, while stocks — particularly those of growth companies whose future earnings are worth less when discounted at higher interest rates — can face additional pressure.
It is worth noting that analyst forecasts, even from major institutions, are estimates based on the data available today. The Fed itself has repeatedly emphasized that its decisions are data-dependent, meaning strong progress on inflation or a meaningful weakening in the labor market could shift the path of rates in either direction. The central bank’s own projections, updated quarterly, remain the most closely watched guide to where policy is heading.
Upcoming inflation readings and labor market data will be key in determining whether the Fed’s own signals move closer to or further from Wall Street’s current expectations.
