Bank of America (BofA) Global Research has become much more hawkish on U.S. monetary policy and has now projected three Fed rate hikes this year in 2026. The updated forecast puts the bank in line with Wall Street’s most bullish forecasters. A raise in Fed’s interest rates could potentially put added pressure on risk assets, notably cryptocurrencies.
Bank of America Expects 75 bps Fed Rate Hike This Year
In a statement issued Monday, Bank of America predicted a 25 basis point increase in interest rates by the Federal Reserve in each of the sessions September, October and December. In total, it signals a 75 basis point rise in Fed rates, landing in the 4.25%-4.50% range. The outlook is a dramatic change from those of previous times when policymakers were predicting no rate changes during the year.
Deutsche Bank too also raised its forecasts, forecasting two 25 bps hikes in 2026, one in September and another in December. The new forecasts differ from the aggregate of the large brokers who, on average, are predicting steady borrowing rates this year.
The shift comes after the Federal Reserve’s last FOMC meeting. At the time, policymakers kept the benchmark interest rate steady. However, almost half of the Fed members indicated that they’d likely raise rates before the end of the year to address rising inflation and the U.S. economy’s power. This represented a hawkish stance, which quickly sent Bitcoin down to the $62,000 level.
To justify it’s revised stance, Bank of America analysts wrote, “June Summary of Projections and Warsh’s comments indicate that the Fed’s reaction function is much more hawkish than we thought.”
Meanwhile, Deutsche Bank also priced in two outcomes at upcoming FOMC meetings. “On the hawkish side, there is the potential for the Committee to coalesce around a July rate hike. On the dovish side, the recent improvement in energy prices and inflation expectations may more sustainably reduce the urgency to act,” the bank said, per Reuters report.
Based on LSEG pricing, markets are pricing in about 41.2 bps of tightening for 2026.
Impact On Bitcoin, Crypto Market
Generally, the crypto market is affected by higher interest rates in two ways. High Fed rates cause less liquidity and attract more buyers to yield-bearing assets like Treasury securities.
Risk assets such as Bitcoin and altcoins may suffer from a prolonged tightening cycle, as investors move to more conservative investments. Therefore, future rate hikes could present near-term headwinds for crypto prices and overall market narrative.
Currently, Bitcoin is consolidating within the $64,000-65,000 range despite the positive outcome in the US-Iran deal. Hence, a Fed rate hike this year could further exacerbate the bearish sentiment in the crypto market.
