BofA Forecasts Additional Fed Rate Hikes Amid Economic Resurgence

The bank’s latest US Economic Weekly report highlights a significant revision in growth expectations, with third-quarter projections jumping to 3.5 per cent from an initial 2.4 per cent. This shift is fueled by robust consumer spending and aggressive investment in artificial intelligence infrastructure. Analysts argue that a pause in October could leave the central bank trailing behind market realities, potentially requiring steeper interventions later.

If the Federal Reserve opts to hold rates steady in October, the most probable trajectory involves 25-basis-point hikes in December 2026 and March 2027. Further adjustments could follow in June and September 2027 should inflationary pressures fail to subside. Core personal consumption expenditure is expected to remain above the Fed’s 2 per cent target through 2027, with risks skewed toward higher price levels. Investors are now looking toward upcoming September inflation data and commentary from Fed Chair Warsh at the IMF meetings to confirm whether the tightening cycle will accelerate.