Bank of America Pushes Fed Rate Cut Expectations to Second Half of 2027 Amid Strong Inflation and Job Growth
Bank of America now expects the Federal Reserve will not cut interest rates until the second half of 2027, citing persistently strong inflation and resilient job growth. The updated forecast reverses the bank's earlier predictions of rate cuts in 2026, signaling higher-for-longer interest rates ahead.
Fed Rate Cut Timeline Extended
Bank of America predicts the Federal Reserve will delay lowering interest rates until the second half of 2027, mainly due to strong inflation and resilient job growth. The firm had previously penciled in two rate cuts this year in September and October, based on expectations that Kevin Warsh would steer policymakers toward easing monetary policy.
Economic Backdrop Shifts
Economists with the financial firm said Friday that they "no longer expect the Fed to cut rates this year," while noting that multiple shocks affecting the economy, including the Iran war, tariffs and emergence of AI, are making it harder to forecast interest rate moves. A stronger-than-expected jobs report also weakens the argument for rate cuts, with employers adding 115,000 jobs in April, topping forecasts of 65,000 payroll gains.
Inflation Focus
With data showing the job market remains steady, Wall Street analysts said the Fed will focus on taming inflation.