Bank of America Revises Fed Policy Forecast

Bank of America has updated its outlook on the Federal Reserve’s monetary policy, concluding that the cycle of interest rate cuts has ended.

According to the bank’s US economics team, “Given a resilient labor market, we now think the Fed cutting cycle is over,” following the release of the jobs report.

The revision follows a strong December jobs report, which showed a significant increase in payrolls and a slight decline in the unemployment rate to 4.1%.

BofA economists pointed to the labor market’s resilience as a primary reason for their reassessment, indicating that current economic conditions do not justify further easing from the Federal Reserve.

Additionally, the report highlighted that inflation remains above the Fed’s target. The central bank’s projections for 2025 suggest rising inflation expectations and increased risks.

BofA does not expect the upcoming revisions to significantly impact the Fed’s decisions. They believe the labor market has stabilized after a period of volatility and that any revisions will likely indicate a downward level shift rather than altering the overall trend.

Economists also indicated that both market-based inflation and core PCE have plateaued at levels inconsistent with the Fed’s targets, providing little hope for a policy shift.

“Economic activity is robust. We see little reason for additional easing,” they concluded.