Bank of America has projected three Federal Reserve interest-rate hikes this year, adding to concerns that tighter monetary policy could create fresh pressure for Bitcoin and other risk assets.
- Bank of America now expects three Fed rate hikes in September, October, and December, citing a more hawkish policy outlook.
- Deutsche Bank and BNP Paribas have also raised their rate forecasts, adding to expectations of tighter monetary policy.
- Traders are watching the upcoming PCE inflation report as Bitcoin holds near $64,000-$65,000 amid growing rate-hike concerns.
According to a Reuters report, Bank of America Global Research now expects the Federal Reserve to raise rates by 25 basis points at its September, October, and December meetings, bringing the policy rate to a range of 4.25%-4.50% by year-end.
The forecast represents a sharp departure from the bank’s earlier expectation that rates would remain unchanged throughout the year. The revised outlook arrives as investors prepare for the release of the U.S. Personal Consumption Expenditures inflation report, the Fed’s preferred gauge of inflation.
Economists surveyed ahead of the June 24 release expect headline PCE inflation to rise 0.5% month-over-month in May after a 0.4% increase in April. Annual inflation is expected to accelerate to 4.1% from 3.8%, while core PCE is forecast to increase 0.3% on a monthly basis and 3.4% from a year earlier.
A stronger-than-expected reading could reinforce expectations that policymakers will keep borrowing costs elevated for longer or even tighten policy further.
Wall Street forecasts point to a more hawkish Fed
In explaining its revised outlook, Bank of America said the Federal Reserve appears more focused on inflation risks than previously anticipated.
The bank wrote that the Fed’s June economic projections and comments from Chair Kevin Warsh suggested policymakers were operating with a more hawkish reaction function than earlier estimates indicated.
Another large institution has moved in a similar direction. Per the Reuters report, Deutsche Bank has also adopted a more hawkish outlook, forecasting two quarter-point rate hikes this year in September and December.
The bank additionally outlined a scenario in which policymakers could consider a July increase, while noting that easing energy prices and improving inflation expectations may reduce the need for immediate action.
A separate forecast from BNP Paribas points to additional tightening as well. As previously reported by crypto.news, the French bank expects three rate hikes beginning in December after abandoning its prior assumption that policy would remain unchanged.
BNP Paribas linked its outlook to resilient labor-market conditions, stronger-than-expected employment data, and rising inflation pressures that it partly associates with the ongoing U.S.-Iran conflict. The bank also projected the unemployment rate could fall toward 4% by year-end, potentially giving policymakers more room to concentrate on inflation.
Bitcoin traders watch inflation and rate signals
Recent pricing in prediction and futures markets shows investors remain divided on the Fed’s next move.
Data from Kalshi indicates a 22% probability of a rate increase in July, while a pause remains the most likely outcome. Separately, CME FedWatch data shows traders assigning a 51.7% probability to a quarter-point hike at the September meeting.
Market-based expectations also point toward tighter policy. According to LSEG pricing data, traders have priced in approximately 41.2 basis points of additional tightening over the course of the year.
Higher interest rates typically reduce liquidity available for speculative investments while increasing the appeal of yield-bearing assets such as U.S. Treasuries. Because of that relationship, digital assets often face pressure when investors anticipate tighter monetary conditions.
Bitcoin (BTC) has recently traded within the $64,000-$65,000 range despite improving geopolitical sentiment following developments related to the U.S.-Iran situation. With inflation data due this week and major banks raising their forecasts for future rate increases, traders are closely watching whether incoming economic data strengthens the case for additional Fed tightening.
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