Bank of America Revises Forecast, Sees End to Interest Rate Cut Cycle
Bank of America’s US economics team has revised its forecast for the Federal Reserve’s monetary policy, concluding that the cycle of interest rate cuts has come to an end. The bank attributes this change of heart to the robust December jobs report, which showed a significant increase in payrolls and a slight decrease in the unemployment rate to 4.1%.
The report highlights the resilience of the labor market as a key factor in its reassessment, indicating that economic conditions do not warrant further easing by the Federal Reserve. Additionally, the economists note that inflation remains above the Fed’s target, with projections indicating higher inflation expectations and a tilt towards the upside.
The report also suggests that the market-based inflation and core PCE have plateaued at levels not aligned with the Fed’s targets, offering little reassurance for a shift in policy. With the labor market having stabilized after a period of volatility and early fall, the economists conclude that economic activity is robust and there is little reason for additional easing.