Bank of America Shifts Rate Cut Forecast to 2027 as Inflation Persists
Bank of America now expects the Federal Reserve to delay interest rate cuts until the second half of 2027, citing stubbornly high inflation above the Fed's 2% target and strong job growth. The forecast reversal reflects multiple economic shocks including the Iran war, tariffs, and AI-driven productivity concerns.
Rate Cut Delay
Bank of America predicts the inflation-and-job-growth-LCFYQ04y">Federal Reserve will delay lowering interest rates until the second half of 2027, mainly due to strong inflation and resilient job growth. Multiple shocks affecting the economy, including the Iran war, tariffs and emergence of AI, are making it harder to forecast interest rate moves.
Inflation Concerns
The Fed is grappling with rising inflation, which at 3.3% remains stubbornly above its 2% annual target, with inflation having jumped since the start of the Iran war due to higher energy prices. Core inflation is too high and moving up, with rate cuts more likely in the second half of 2027 as inflation starts to recede.
Policy Uncertainty
Bank of America Global Research had previously expected Kevin Warsh, President Trump's nominee to succeed Jerome Powell as Fed chair, would steer policymakers toward easing monetary policy, but that view has changed.