Bank of America Global Research told clients on June 22, 2026 that it now expects a total of 75 basis points of Federal Reserve rate hikes in 2026, laid out as three 25 basis point moves in September, October and December. The shift reflects what BofA economists describe as a surprisingly resilient U.S. labor market and a Federal Reserve that is sounding more hawkish under its new chair.
That revised path was first detailed by Reuters, which reviewed the client note and quoted analysts saying "the Fed's reaction function is much more hawkish than we thought." According to the Reuters summary, BofA is penciling in 25 point hikes in September, October and December and expects the central bank to keep policy at that higher level into 2027.
Why BofA Flipped Its Rate Call
Fresh labor market numbers sit at the heart of the rethink. The U.S. economy added 172,000 payroll jobs in May while the unemployment rate held at 4.3 percent, a combination that signals hiring is still solid enough to complicate any quick pivot back to rate cuts. Data from the BLS show job growth concentrated in leisure, health care and local government, a sector mix that helps explain why BofA is backing away from its earlier, more dovish scenarios.
Markets Are Not Fully Buying It
Traders, for now, are only half convinced. Futures and money market prices are still pointing to less tightening in 2026 than BofA is calling for, leaving a noticeable gap between the research desk and the trading floor. The CME Group FedWatch Tool tracks that disconnect in real time, with odds on each potential move later this year shifting as new data land.
What Higher-For-Longer Means For Borrowers
For anyone with a mortgage application sitting on the kitchen table, the stakes are not theoretical. The average 30 year fixed mortgage rate hovered around 6.5 percent in early June, based on Freddie Mac's weekly survey, so additional Fed tightening could keep borrowing costs elevated and make already stretched affordability even tougher. Freddie Mac data show rates edging higher as markets slowly reprice the odds of more rate hikes.
Where BofA Stands Now And What Could Change
BofA's analysts argue that the Fed's "reaction function" now looks more hawkish, which in their view makes rate cuts in 2027 less certain, according to Reuters. That marks a clear pivot from the bank's December 2025 macro outlook, which still allowed for some easing down the road, per BofA Global Research. The durability of this new, tougher call will be tested by inflation prints in July and August and by the labor reports that land ahead of the autumn FOMC meetings.
For local businesses and borrowers in Washington and Charlotte, those data releases suddenly matter a lot more to the bottom line. A higher for longer Fed means costlier loans, tighter commercial credit and a prolonged squeeze on housing affordability. Expect the next rounds of research notes and market swings to show up not just on Wall Street screens but in Main Street budgets, from shop owners recalculating expansion plans to first time buyers recalculating what they can afford.
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