BOFA GLOBAL RESEARCH EXPECTS FED TO HIKE RATES BY 25 BPS EACH IN DEC 2026 AND MARCH 2027

BofA Global Research has forecast two successive 25 basis point Federal Reserve rate hikes, one in December 2026 and another in March 2027, a call that reverses the easing bias many market participants had priced in. The transmission mechanism runs through the policy rate path and its effect on discount rates, as higher expected short-term rates lift the front end of the Treasury curve, compress the spread between long-dated and short-dated yields, and tighten financial conditions across equities and credit. Bank of America (BAC) is most directly exposed through its net interest margin, since a rising-rate environment can widen asset yields relative to deposit costs, but the same tightening raises credit loss risk on consumer and commercial loan books and can depress investment banking and trading activity. Traders will watch the December 2026 FOMC dot plot and the upcoming CPI and core PCE releases, as inflation prints that come in above consensus would validate a hiking path and push forward rate expectations higher.

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