Morning Market Tidbits: Change of call: Fed to hike 75bp this year

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Morning Market Tidbits: Change of call: Fed to hike 75bp this year

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Morning Market Tidbits

Change of call: Fed to hike 75bp this year

Key takeaways 22 June 2026

Economics• We expect the Fed to hike by 75bp this year, starting in Sep. Sticky inflation will likely

United States

keep policy on hold next year.

• The data call for hikes. Moreover, the Jun SEP & Warsh's comments indicate a more Aditya Bhave

US Economist

hawkish reaction function than we thought. BofAS

aditya.bhave@bofa.com

• Today's events: Comments from Waller after the hawkish June FOMC meeting.

US Economics

BofAS

See Team Page for List of Analysts

What Matters Today: We now expect the Fed to hike 75bp this year in Sep, Oct, and Dec, about

25bp more and three months earlier than market pricing of two hikes by Mar-27 SEP: Summary of Economic

Fed Funds Rate market pricing vs. BofA forecasts (midpoint, %) Projections

5.00 Market pricing BofA

4.75

4.50

4.25

4.00

3.75

3.50

3.25

3.00

Jun-26 Aug-26 Oct-26 Dec-26 Feb-27 Apr-27 Jun-27 Aug-27 Oct-27 Dec-27

Source: BofA Global Research

BofA GLOBAL RESEARCH

Hawkish data and reaction function point to hikes

We now expect three 25bp Fed hikes this year, in Sep, Oct & Dec. This would take the

policy rate to 4.25-4.5%. We were skeptical of the need for cuts in 2025. Both the data

and our updated read of the Fed's reaction function suggest the Fed would reverse those

cuts in short order. We think the Fed would stay on hold next year. Inflation is likely to

remain sticky, keeping the real policy rate from becoming overly restrictive.

From risk management to supply shock management

Powell framed last year's 75bp of cuts as "risk management" cuts, due to the slowdown

in the labor data. But the labor market has firmed up this year, while inflation has gotten