Fed unlikely to cut interest rates until 2027, Bank of America says
Summary
Bank of America now expects the Federal Reserve to wait until the second half of 2027 before cutting interest rates because inflation remains high and the job market is strong. Other economic factors, such as energy prices and the impact of artificial intelligence (AI), are making the Fed cautious about lowering borrowing costs soon.Key Facts
- Bank of America changed its forecast and no longer expects interest rate cuts in 2024.
- The Fed faces high inflation at 3.3%, above its 2% target.
- Strong job growth was reported with 115,000 new jobs added in April, more than expected.
- Some Federal Reserve officials want to avoid cutting rates to prevent the economy from overheating.
- Inflation has risen partly because of higher energy costs linked to the Iran war.
- AI-driven productivity gains and tariffs are adding inflationary pressure.
- Market tools show less than a 50% chance of rate cuts before the second half of 2027.
- The last Fed rate cut was in December 2025, lowering rates slightly.
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