Bank of America Extends Rate Hike Forecast to 2028 Under Warsh

Published by James Harris on June 22, 2026June 22, 2026

Bank of America has reversed its Federal Reserve call entirely, now projecting three rate hikes totaling 75 basis points in 2025 under new Chair Kevin Warsh, with no cuts expected until 2028. Days ago, the bank thought the Fed would hold steady and absorb war-driven price pressure. That view did not survive Warsh’s first meeting.

The shift is driven by a straightforward diagnosis: inflation is not cooperating. BofA economist Aditya Bhave wrote that “the Fed’s inflation problem has gotten unambiguously worse,” pointing to sticky services prices and the fading disinflationary drag from rent and housing that had been quietly doing the Fed’s work for the past year. The Fed has missed its 2% target for five consecutive years, a streak that began with the 2021 surge that policymakers initially called transitory. Markets are now pricing in at least one hike this year, with September as the likely starting point and a greater than 50% probability of a second move in December per CME FedWatch data. For crypto and risk assets broadly, the implications are direct: the higher-for-longer rate environment that markets spent most of 2024 hoping to escape has now been extended by roughly three years.

Warsh mentioned price stability approximately a dozen times in his first meeting, which is not the behavior of a chair preparing to ease.

Beyond the rate path, the more structural shift is in how the Fed communicates. Warsh has signaled a review of forward guidance tools, including the quarterly projections and press conference cadence that Jerome Powell normalized. Deutsche Bank’s chief U.S. economist Matthew Luzzetti called it “a big change,” saying Warsh has put the post-2008 transparency project “in reverse.” That matters for markets because ETF flows and institutional positioning have been calibrated around a Fed that telegraphs moves well in advance. A return toward Greenspan-era opacity, where the 1994 rate hike blindsided markets enough to drop the Dow 2.4% in a single session, would reintroduce a risk premium that has been largely absent for fifteen years.

BofA left some flexibility in its forecast. Bhave did not rule out more than 75 basis points total, and a July hike remains possible depending on summer data. The base case has the Fed pausing through 2027 before cutting in 2028, a timeline that would keep pressure on long-duration assets, including crypto, for longer than most current positioning reflects.