Bloomberg Surveillance · Monday, June 29, 2026
An analyst from Bank of America suggests the Federal Reserve might implement three rate hikes this year, diverging from market expectations. This prediction is based on persistent inflation data and the Fed's reaction function, despite some market participants expecting fewer or no hikes.
“So our forecast is just that they'll take back the cuts that they did last year. Those risks around labor have dissipated at this point. And then in terms of the reaction function, we thought going into June that this was fundamentally a dubbish FOMC that would find reasons to not high rates. But the SEP it's not just about the dot plot. It's the fact that nine people expect to hike even though no one has the unemployment rate falling this year, So that for US is a hockey shift in the action fly.”
“Seventy five basis points is very normal for a mini cycle for the FED So to be clear, we don't think they have as much of an inflation problem as they did back in twenty twenty two. Underlying inflation isn't three and a half percent. It's probably closer to two eight or something like that, which is why they don't need to go back to five percent. Right a three and a half percent core PC the tailor rule would tell you need to be at five percent.”