Bank of America has revised its expectations regarding the Federal Reserve’s rate cutting process. The central bank’s latest outlook shows no further rate cuts are expected this year due to high inflation and a solid employment outlook. The agency also predicted that the rate cut could be delayed until the second half of 2027.
The bank previously expected the Fed to cut interest rates twice this year in September and October, based on expectations that U.S. President Donald Trump would nominate Kevin Warsh to replace Jerome Powell as Fed chair and that Warsh would support easy monetary policy. However, these expectations have been revised due to changes in the economic outlook.
“We can no longer expect the Fed to cut rates this year,” Bank of America economists said in their review. The report also added that multiple shocks, such as the Iran war, tariffs, and economic transformation driven by artificial intelligence, make monetary policy difficult to predict.
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Economists say that growing disagreement within the Fed could keep interest rates at current levels for an extended period of time. The 8-4 decision at the Federal Open Market Committee’s (FOMC) last meeting in April 2026 marked the largest disagreement since 1992.
The report says disagreements among policymakers are growing, reinforcing the Fed’s “wait-and-see” approach. This could keep interest rates at current levels for an extended period of time and postpone monetary policy until new economic data emerges.
*This is not investment advice.
