BofA Sees 3 Rate Hikes This Year, No Cuts Until 2028

Bank of America (BAC) has shifted its Federal Reserve outlook, now forecasting three interest rate hikes totaling 75 basis points this year before an extended pause, pushing any prospect of rate cuts well into 2028.

Forecast Change

The new forecast marks a significant shift from earlier estimates that expected rate cuts to begin in 2025 or 2026. BofA now sees the Fed continuing to tighten monetary policy to combat persistent inflation, then holding rates at elevated levels for an unprecedented period.

Rationale

BofA analysts believe core inflation remains above target and the labor market is still strong, giving the Fed room to continue raising rates. They also expect the Fed to prefer a longer waiting period before any easing to ensure price stability.

Context

The forecast comes as investors await upcoming Fed meetings. Most major investment banks expect one or two rate hikes this year, but BofA's outlook is the most hawkish. BAC stock is trading near its yearly high.

What to Make of It

The new outlook means interest rates will stay higher for longer, potentially pressuring growth stocks and rate-sensitive sectors. However, banks may benefit from wider net interest margins. Investors should adjust expectations accordingly.