Bank of America strategists believe investors should begin preparing for the risk that the Federal Reserve will raise the benchmark interest rate to 5% or more. A team of strategists, including Mark Cabana and Meghan Swiber, said that the interest rate market still underestimates the interest rate level that may eventually be reached during the interest rate hike cycle initiated by the Federal Reserve this week, and urges customers to take positions for further increases in US two-year Treasury yields. The swap market price reflects that the Federal Reserve will also raise interest rates by 25 basis points three times, which will raise the effective federal funds rate to the 4.5%-4.75% range. However, Bank of America believes that overnight borrowing costs may once again hit the high point of the 2022 to 2023 interest rate hike cycle, when the federal funds target interest rate reached as high as 5.5%. Bank of America expects two-year US Treasury yields to rise to 5% this year from about 4.7% on Friday. This forecast contradicts market consensus. The team said that Federal Reserve Chairman Kevin Walsh's statement about Wednesday's interest rate hike withdrawing “a certain degree of easing” indicates that officials do not yet believe that monetary policy has constrained the US economy.

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