Bank of America and PGIM Flip Forecasts to Three Fed Hikes in 2026
Bank of America and PGIM reversed their Fed outlooks this month to predict three rate hikes totaling 75 basis points in 2026, citing 4.2% inflation in May and persistent oil price pressures from the Iran war.
Bank of America and PGIM, the asset management arm of Prudential Financial, updated their Federal Reserve rate forecasts this month to include three rate hikes in 2026, a sharp reversal from earlier expectations for cuts. Bank of America analyst Aditya Bhave published the new forecast Monday, projecting 75 basis points of increases in September, October, and December, while PGIM's midyear global market outlook earlier this month also shifted to three hikes.
Inflation reached 4.2% in May, the highest reading in three years and more than double the Fed's 2% target, driven by elevated energy costs tied to the ongoing war in Iran. The labor market added 172,000 jobs in May, outpacing expectations with concentrated gains in healthcare, hospitality, and local government. Fed Chair Kevin Warsh, leading his first meeting this month after President Donald Trump nominated him in January, held rates steady with a unanimous vote but adopted a more hawkish tone on inflation than markets expected.
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