Bank of America Global Research economists expect the Federal Reserveto raise interest rates three times this year due to Chair Kevin Warsh’s more hawkish stance and the nation’s overall economic resilience despite the Iran War.
BofA revised its forecast after the Fed left the benchmark federal funds rate unchanged June 17 as almost half of central bank’s policymakers indicated that they expect rates to rise before the end of the year
The BofA note is yet another sign that Wall Street expects Warsh to become more aggressive to lower inflation closer to the Fed’s 2% target, a metric the central bank has missed for the last five years. “(The) June Summary of Projections and Warsh’s comments indicate that the Fed’s reaction function is much more hawkish than we thought,” BofA analysts said in a note emailed to TheStreet. Previously, BofA analysts expected the Fed to hold rates steady this year. Fed keeps rates steady thus far this year June 17, the Federal Open Market Committee voted 12-0 to hold the benchmark federal funds rate steady at 3.50%-3.75%.
Policymakers had cut rates by 25 basis points at its last three meetings of 2025 to shore up the softening labor market. More Federal Reserve: These “insurance” cuts stopped after the majority of policymakers decided the risk from higher prices was outweighing signs that the jobs market was stabilizing. The funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.