Bank of America Projects Three Consecutive Fed Rate Hikes Through March 2027

Bank of America now expects the Federal Reserve to raise interest rates at each of its next three meetings, adding a 25-basis-point hike in January 2027 to a forecast that already had moves in December 2026 and March 2027. That path would take the federal funds rate from today's 3.75% to 4.00% range to a peak of 4.50% to 4.75%. The bank previously expected two more hikes at a quarterly pace and a peak of 4.25% to 4.50%.

The trigger was October's consumer price report, the third straight month that CPI beat expectations, with headline prices up 0.4% and core up 0.3%. "After Oct CPI, the Fed looks further behind the curve on inflation," BofA economist Aditya Bhave wrote. "It no longer has the luxury of hiking at a quarterly pace." The bank described price gains as broad-based, driven partly by AI and consumer demand, and now tracks core PCE inflation, the Fed's preferred gauge, at 3.3% year over year. According to TheStreet Pro, the new call is one hike more than Goldman Sachs expects and matches Deutsche Bank's path, and BofA has no rate cuts penciled in for 2027 or 2028.

Bhave called the risks to the call balanced. The Fed could delay or skip the final hike if data soften or financial conditions tighten significantly, while a surge in wage inflation or large price increases early next year could push rates above 5%. The forecast also matters less as a surprise than as confirmation: the bond market had already priced three hikes before the note went out, as BofA strategist Michael Hartnett noted the same morning, and the 10-year Treasury yield has climbed from 4.19% on January 2 to 4.98% on November 10.

The next checkpoints are close. BofA expects next week's minutes from the October meeting to show a deeper split over the decision to hold than the 10-2 vote suggested, and it expects October retail sales excluding autos to rise 0.4% when they are released on Tuesday. A hotter print on either front would support the faster pace, while softer data would bring the skipped-final-hike scenario into play. For savers, money fund yields tend to follow the Fed within weeks; the Crane 100 money fund average stood at 3.75% on November 11.