WASHINGTON, D.C. — Bank of America forecasts two additional 25-basis-point Federal Reserve rate hikes in October and December 2026. The prediction follows a unanimous decision by the Federal Open Market Committee to raise rates earlier this month.

The Federal Open Market Committee voted unanimously 12-0 on September 16, 2026, to raise the federal funds rate by 25 basis points. This action moved the federal funds rate target range to 3.75% to 4%.

Sixteen of 18 Federal Reserve policymakers project at least one additional rate increase before the end of 2026. Federal Reserve Chairman Kevin Warsh addressed the economic conditions surrounding these decisions during a press conference.

"There's been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened," Warsh said. He also outlined the limitations of the central bank's influence on specific market sectors.

"We cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store. But what we can do, and will do is ensure that any change in relative prices don't broaden out. Don't have second and third order effects in the economy, Warsh stated."

Bank of America analyzed these dynamics in a client note regarding the trajectory of monetary policy. The robustness of the nominal economy both increases the risks of inflation persistence and reduces the risks that hikes will cause a recession," Bank of America stated in a client note. "However, if supply shocks prove persistent, the Fed might eventually have to choose between an extended inflation overshoot and a hard landing," Bank of America stated in a client note."

Why It Matters

The forecast by Bank of America shows the ongoing tension between controlling inflation and maintaining economic stability. With sixteen of eighteen policymakers expecting further increases, the path toward price stability remains active despite concerns about potential hard landings.

The rise in mortgage rates to 6.95% demonstrates how federal funds rate adjustments directly affect borrowing costs for households. As the Federal Open Market Committee continues to monitor labor market data and supply shocks, the balance between inflation persistence and recession risk will define the remainder of the year.

Timeline

In 2025, U.S. net debt stood at 96.7% of GDP with a primary deficit of 3.17% in 2025. On September 16, 2026, Federal Reserve Chairman Kevin Warsh stated, "We cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store. Don't have second and third order effects in the economy. Also on September 16, 2026, Federal Reserve Chairman Kevin Warsh said, There's been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened." On that same date, sixteen of 18 Federal Reserve policymakers project at least one additional rate increase before the end of 2026.

Consequently, the federal funds rate target range is now 3.75% to 4%. By September 18, 2026, the weekly average rate for a 30-year fixed-rate mortgage in the U.S. rose to 6.95% following the Federal Reserve's rate hike. On September 19, 2026, Bank of America stated in a client note, "However, if supply shocks prove persistent, the Fed might eventually have to choose between an extended inflation overshoot and a hard landing."

What's New

Federal Reserve Chairman Warsh said, "There's been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened." Contextual information identifies the Federal Open Market Committee as a committee of the United States Federal Reserve.