BofA, Deutsche Bank Now Expect Fed Rate Hikes In 2026
By CU Today Staff —
CHARLOTTE, N.C.—Two major Wall Street firms have reversed course and now expect the Federal Reserve to raise interest rates this year, citing a stronger-than-expected economy and a more hawkish policy stance under Fed Chair Kevin Warsh, according to Reuters.
Reuters reported that both BofA Global Research and Deutsche Bank abandoned earlier forecasts that rates would remain unchanged through 2026.
BofA issued the most aggressive forecast among major brokerages, projecting three quarter-point rate increases in September, October and December. Deutsche Bank expects two 25-basis-point hikes, one in September and another in December. Their outlook contrasts with most Wall Street forecasts, which continue to anticipate steady rates through the remainder of the year, Reuters reported.
The revised forecasts follow the Federal Reserve’s decision earlier this month to leave its benchmark rate unchanged. However, nearly half of Fed policymakers now expect rates to move higher this year amid continued labor market strength and persistent inflation concerns. BofA analysts told Reuters that the Fed’s June economic projections and comments from Warsh signaled a more hawkish policy approach than previously expected.
Deutsche Bank said risks remain on both sides of its forecast. The firm noted policymakers could move as early as July if inflation pressures intensify, while improving energy prices and easing inflation expectations could reduce the urgency for additional tightening. Markets are currently pricing in about 41 basis points of rate increases this year, according to LSEG data cited by Reuters. Both BofA and Deutsche Bank expect rates to remain unchanged in 2027, with Deutsche Bank forecasting the Fed will begin cutting rates in 2028.
Originally reported by CU Today.