Bank of America Now Sees Three Rate Hikes in 2026. Your CD Ladder Might Be the Wrong Bet.

Bank of America's economists don't think the Fed is finished raising rates — they think it has three hikes left this year, landing in September, October, and December. That call would push the federal funds rate to a range of 4.25% to 4.50% by December, and it upends a decision a lot of savers made this spring: locking a multi-year CD.

The forecast builds on a shift that started at the Fed's June 17 meeting, when new chair Kevin Warsh's committee held its benchmark rate at 3.50%–3.75% for a fourth straight meeting but quietly dropped its prior language about "additional rate adjustments" in favor of a neutral, data-dependent tone. Nine of the eighteen FOMC officials who submit projections now pencil in at least one rate hike before the end of 2026 — a sharp reversal from earlier in the year, when the same committee was debating how many cuts to deliver, not whether to raise rates at all.

Bank of America went further two weeks after that meeting, putting a specific number and calendar on the reversal. If that path holds, the five-year CD you locked in March at what looked like a great rate could turn out to be the worst decision you made with your cash all year.

A Fed Chair Who Ran on Inflation, Not Growth

Kevin Warsh was sworn in as Fed chair on May 22, 2026, promising to lead a "reform-oriented" Federal Reserve. He inherited an inflation problem that hadn't gone away: April's CPI came in at 3.8%, up from 3.3% in March, with core inflation rising to 2.8% from 2.6%. Traders were already pricing a 57% probability of at least one hike by December before Warsh's first meeting even happened.

Bank of America's economists point to three reasons for their hawkish call: inflation data they describe as "unambiguously worse," stronger-than-expected job growth, and rising energy prices. Markets, for comparison, are only pricing in about one quarter-point hike by year-end — which makes BofA's forecast one of the most aggressive on Wall Street, and a real possibility rather than a fringe scenario.

Bond markets already moved on the news. In the hours after the June 17 statement, the 2-year Treasury yield — the maturity most sensitive to what the Fed does next — rose about 11 basis points to 4.153%, while the 10-year climbed to 4.469%. Short-term yields moving up faster than long-term ones is exactly what you'd expect if traders think more hikes are coming before any cuts do. Banks that fund high-yield savings accounts price off that same short end of the curve, which is why savings APYs tend to react to Fed moves faster than CD rates do.

The Case for Staying Liquid

So what do you do with idle cash while the Fed makes up its mind? The instinct that drove CD sales earlier this year assumed the next move was down — lock a rate now before it falls. If the next move is up instead, a locked rate stops being a bargain and becomes a ceiling.

A high-yield savings account doesn't have that problem. The rate floats with the market, which means it can rise the same way it did during the 2022–2023 hiking cycle, when top savings yields climbed well past 4% while savers who'd locked multi-year CDs in 2021 sat frozen at under 1%. That's the exact bet a High-Yield Savings Calculator lets you model before you decide where new cash goes.

What $20,000 Does in Each Account

Here's the math, using today's real numbers. A top five-year CD currently pays about 4.25% APY, fixed for the full term. A top high-yield savings account pays 4.50% APY today — but unlike the CD, that rate can move.

Assume Bank of America's forecast plays out and your bank passes the hikes through in steps: 4.50% through August, ticking up to 4.75% after the September hike, 5.00% after October, and 5.25% after December. Plug those numbers into a high-yield savings calculator on $20,000 and the account earns roughly $930 over the first year — about $80 more than the $850 the CD locks in, even though the CD started at a competitive rate.

*If Bank of America's forecast holds and the bank passes the hikes through.

One honest caveat: banks aren't obligated to pass a Fed hike through to savers dollar for dollar, and some are slower than others. The same was true on the way down — plenty of banks kept savings yields elevated for months after the Fed started cutting in 2024 because they didn't want to lose deposits. That lag can work in your favor too. But it's a reason to check your specific bank's rate history before assuming the full 75 basis points shows up in your account by December.

Where a Locked CD Still Wins

None of this means CDs are a bad idea. A CD beats a variable account when you know exactly when you'll need the money and want that number guaranteed — a down payment in 14 months, a tax bill next spring, tuition due in a year. Locking removes the risk that rates fall instead of rise, and Bank of America's own call could be wrong; forecasters have been wrong about Fed policy all year.

The bigger mistake is putting your emergency fund in a multi-year CD chasing an extra quarter point. Emergency cash needs to be liquid no matter what the Fed does next, and that principle doesn't change based on which way rates are expected to move. If the money in question is the fund you'd tap for a job loss or a broken furnace, a CD calculator can show you exactly what you'd give up in an early-withdrawal penalty to get it back early — usually several months of interest, which erases most of the rate advantage you locked in to begin with.

There's also a middle path that doesn't require betting the whole balance either way: split the money. Keep the portion you might need in the next year in a high-yield account, and only lock a CD with cash you're confident you won't touch before maturity — a shorter, 12- to 18-month CD rather than a full five-year term, so you're not frozen at 2026's rate through 2031 if the hiking cycle turns out to be short-lived. Run the trade-off in a CD calculator before you pick a term: laddering shorter CDs gives you a chance to re-lock at a higher rate if BofA turns out to be right, without giving up the guarantee entirely.

The Next FOMC Meeting Is July 29

The Fed's next decision lands July 29, 2026, and Warsh has already signaled he wants a "quieter" Fed with less forward guidance — meaning the next surprise could come with less warning than usual. That's a reason to check your own numbers now rather than after the meeting moves the rate environment again.

If your cash doesn't have a hard deadline attached to it, run it through the High-Yield Savings Calculator and compare what you'd earn if the hikes land against what the CD Calculator shows for locking in today's fixed rate. The four-tenths-of-a-point gap between a top CD and a top savings account looks small until you multiply it by three more hikes that weren't supposed to happen.