Bank of America’s revised forecast calling for three Federal Reserve interest rate increases this year has reignited worries among cryptocurrency investors about the impact of tighter monetary policy on digital assets. The financial giant now anticipates quarter-point rate hikes in September, October, and December, pushing the benchmark rate to a 4.25% to 4.50% range by year’s end. This marks a significant shift from its earlier prediction that rates would hold steady through 2026.
The warning from Bank of America joins similar projections from Deutsche Bank and BNP Paribas, who have also adjusted their outlooks toward more aggressive tightening. Deutsche Bank expects two rate rises in September and December, while BNP Paribas forecasts three hikes starting in December. These moves suggest a growing consensus among major financial institutions that the Federal Reserve will prioritize combating inflation over supporting economic growth.
Market participants are now closely watching the upcoming release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure. Economists predict headline PCE climbed 0.5% in May month over month, accelerating to an annual rate of 4.1% from 3.8%. Core PCE, which excludes food and energy, is expected to rise 0.3% monthly and 3.4% annually. A hotter-than-expected reading could reinforce the case for additional rate increases.
Bitcoin has been trading in the $64,000 to $65,000 range, largely unmoved by recent geopolitical improvements. However, the threat of higher interest rates—which reduce liquidity for speculative assets and make yield-bearing alternatives like Treasuries more attractive—could apply downward pressure on cryptocurrency prices. According to Kalshi data, there is a 22% probability of a July rate hike, while CME FedWatch indicates a 51.7% chance of a September increase. LSEG pricing data shows traders have already priced in roughly 41.2 basis points of additional tightening for the year.
The hawkish shift from Bank of America and its peers underscores a broader reassessment of monetary policy risks. As inflation data rolls in and rate expectations firm, Bitcoin and other digital assets may face continued turbulence in the weeks ahead. Investors are advised to stay alert to economic reports that could further sway the Fed’s course.