- Bank of America anticipates the Federal Reserve will implement three interest rate hikes totaling 75 bps by year-end.
- Deutsche Bank predicts a more modest 50-bp increase spread across two hikes during the same period.
- President Trump has directed the Department of Justice to investigate oil companies for potential price manipulation.
Bank of America (BofA) has issued a cautious outlook regarding the U.S. Federal Reserve’s upcoming monetary policy. While previous projections suggested only a single rate increase this year, analysts now anticipate up to three hikes.
Simultaneously, citing frustration over rising fuel costs impacting American consumers, President Donald Trump has called for a federal investigation into oil companies to determine if price gouging is occurring.
Market Already Pricing an Interest Rate Increase
According to BofA’s Global Research, the possibility of an interest rate cut has been eliminated. Instead, a rate hike is now viewed as certain, with markets already pricing in the move. Consequently, the institution has shifted its stance from “no change” to a guaranteed increase before the end of 2026.
The June “Fed dot plot” from the central bank’s Board of Governors indicated that the median projection for the end of 2026 has risen to 38%, up from 34% in March. Analysts expect these adjustments to manifest by September.
The research group noted that a second hike is plausible, while a third could become necessary if inflation remains stubbornly high.
Rising Probability of a 75 BPS Interest Rate Hike
BofA has updated its forecast to align with the Fed’s current trajectory, stating that the central bank will likely raise rates by up to 75 basis points (bps) in the coming months should inflationary pressures persist.
Surging crude oil prices have already pushed headline inflation higher, increasing by 0.5% monthly and 4.2% year-over-year—the sharpest spike seen in three years.
BofA expects the Fed to distribute these increases across the next three Federal Open Market Committee (FOMC) meetings, consisting of 25-bp increases in September, October, and December.
The Federal Reserve has held rates at 3.5%-3.75% since December 2025. If BofA’s forecast holds, rates would climb to a more restrictive range of 4.25%-4.5%.
Deutsche Bank shares this bullish outlook on rates but forecasts a slightly lower total increase of 50 bps across two hikes, with moves expected in September and December.
Trump Orders DoJ Probe on Oil Companies
In a recent post on Truth Social, President Trump announced that he has instructed the Department of Justice to investigate oil companies. Given the recent US-Iran peace deal and the subsequent decline in crude oil costs, Trump argued that lower prices should have already reached the gasoline pump.
While he did not specify individual companies, Trump accused the industry of “gouging” customers, noting that gasoline prices remain significantly higher than the $2.764 per gallon average recorded in January prior to the escalation of the US-Iran conflict.