Bank of America CEO backs three Fed rate hikes this year, signaling trouble for risk assets

Bank of America CEO Brian Moynihan is betting that the Federal Reserve isn’t done tightening. He’s backing a forecast that calls for three rate hikes before the year is out, a stance that puts BofA squarely in the most hawkish corner of Wall Street.

The prediction: 75 basis points of increases spread across September, October, and December, pushing the federal funds rate target from its current 3.50%-3.75% range up to 4.25%-4.50%.

From rate cuts to rate hikes: BofA’s U-turn

Bank of America didn’t start the year expecting hikes. The firm initially anticipated flat interest rates, with some on the Street even pricing in cuts. Then the data arrived, and plans changed.

Moynihan pointed to two culprits for the pivot: a labor market that refuses to cool down and inflation that keeps running hotter than expected. An oil price spike added fuel to an already stubborn inflation picture, making the case for easing essentially evaporate.

BofA’s revised outlook, published on June 22, represents one of the most aggressive calls among major Wall Street banks. Most market participants had been expecting fewer hikes, or none at all, by year-end.

Why Fed Chair Warsh matters here

The BofA forecast didn’t emerge in a vacuum. Fed Chair Kevin Warsh’s own hawkish posture has been a major factor shaping the bank’s revised expectations. Warsh has signaled that the central bank is prepared to keep tightening if inflation data warrants it, and recent readings suggest it does.

Some observers on the Street now believe this tightening cycle could extend well into 2028.

What this means for crypto and risk assets

Rate hikes are the gravitational force that pulls capital away from speculative assets. Higher borrowing costs tend to squeeze corporate profits, slow consumer spending, and generally make investors more cautious. Crypto, which tends to behave like a leveraged version of tech stocks during macro shifts, typically feels the pain even more acutely.

When the Fed tightened aggressively in 2022, Bitcoin dropped from near its all-time highs to under $16K. When rate cuts were anticipated in late 2024, crypto rallied hard.

There’s also a second-order effect worth considering. Higher rates strengthen the dollar, and a strong dollar has historically been a headwind for Bitcoin and other crypto assets priced in USD. A move to 4.25%-4.50% on the fed funds rate would likely keep the dollar elevated through year-end.

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