BofA Global Research said it now expected two more quarter percentage point interest rate hikes from the U.S. Federal Reserve this year, taking its terminal rate forecast to 5.5% to 5.75%.

BofA earlier expected the terminal rate to be held at the current 5%-5.25% range, but the change in forecast comes after the Fed kept its key rate unchanged in the 5%-5.25% on Wednesday, but signaled two more hikes might be needed in 2023 to tame inflation.

The research firm said in a note late Wednesday that it now expects the Fed to increase rates in July and September, and also pushed out its rate-cut expectation to May 2024, from an earlier expectation of a cut in March.

Following a strong raise in economic growth forecast from the Fed, BofA now expects the U.S. economy to register a 1.1% quarter-on-quarter growth in the last quarter of 2023, raising it from a previous expectation of a 0.2% contraction.

(Reporting by Susan Mathew in Bengaluru; Editing by Rashmi Aich)