Bank of America has revised its US monetary policy outlook, now forecasting that the Federal Reserve will implement three separate interest rate hikes before the end of the year. According to the latest projections, the Fed is expected to raise rates by 25 basis points each during the September, October, and December meetings, resulting in a total tightening of 75 basis points for 2026.
Upward revision in interest rate expectations
The adjustment in Bank of America’s forecast was attributed to Fed Chair Kevin Warsh’s firm stance on combating inflation and robust support for tighter monetary policy among Federal Open Market Committee (FOMC) members. The bank’s economics team now anticipates incremental 25 basis point hikes at the last three FOMC meetings of 2026.
As one of the largest US financial institutions, Bank of America’s global market predictions are closely watched. Warsh, addressing his first press conference as Fed Chair, prioritized the fight against inflation as a key policy focus.
Bank of America expects three Federal Reserve interest rate increases before year end, with the tightening spread across September, October, and December, reaching a cumulative 75 basis points.
At least nine FOMC members have publicly supported the prospect of at least one rate hike in 2026, according to details from the report. Aligning with data from Deutsche Bank and CME FedWatch, this marks a rare consensus between market analysts and major investment banks on US monetary policy.
Glossary: Core PCE is a metric closely watched by the US Federal Reserve when monitoring inflation. By excluding volatile items like food and energy, it aims to offer a clear picture of underlying price trends.
| Institution or Indicator | Expectation or Status |
|---|---|
| Bank of America | Three rate hikes in September, October, and December totaling 75 basis points |
| FOMC members | At least nine members publicly support at least one hike this year |
| Upcoming data | Core PCE inflation |
Liquidity and funding implications for crypto markets
Interest rate increases generally restrict capital flowing into riskier assets. As higher discount rates reduce the present value of future cash flows, volatile digital assets such as cryptocurrencies often face additional downward pressure.
Referencing figures from CoinShares, the article notes that the previous rate hike cycle between 2022 and 2023 was characterized by net outflows from digital asset ETPs. This points to a tighter capital environment for institutional investors, ETF issuers, and exchanges. On the flip side, stablecoin issuers may find opportunities for higher returns on their reserves amid rising rates.
Higher policy interest rates are expected to squeeze capital available to risk assets and may weaken venture capital flows to developer teams. The increased cost of capital could make funding conditions in the crypto ecosystem more challenging.
The report also highlights that the easing trend observed during 2024 and 2025 provided support for major digital assets like Bitcoin and Ethereum, while the outlook for 2026—marked by an inflation-focused policy stance—signals a shift toward price stability over growth.
Regulatory landscape: A shifting balance
On the regulatory front, tighter financial conditions could ease some of the oversight pressure on digital assets but are expected to pose new tests for the resilience of on-chain liquidity. The next highly anticipated data point for markets remains the core PCE inflation reading.
