Bank of America forecasts three 25-basis-point rate increases in 2026, boosting prospects for regional banking ETFs like KRE.
Bank of America projects three 25-basis-point Federal Reserve rate hikes in 2026, citing persistent inflation concerns. The Fed’s updated 2026 year-end inflation forecast now stands at 3.6%, with nine officials anticipating at least one rate increase before year-end.
The SPDR S&P Regional Banking ETF (KRE) is positioned to benefit from higher rates, offering diversified exposure to U.S. regional banks. Its 163 holdings and equal-weight structure reduce single-stock risk while providing a 2.11% yield and a 0.35% expense ratio. A rising-rate environment could strengthen net interest income and margins for regional banks.
Inflation remains above the Fed’s 2% target despite recent cooling in CPI and PPI data. With Fed Chair Kevin Warsh viewed as more hawkish, investors are preparing for potential monetary tightening.