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08/07/24
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BofA Analysts Say Recent Data Increases Likelihood of Fed Rate Cut Before Dec
Analysts at Bank of America said that recent economic data increased the likelihood of the Federal Reserve cutting interest rates sooner than their Dec. forecast. BofA emphasizes the labor market was not collapsing although it was easing.
The BofA client note cited employment data for June and stated that the labor market was showing indications of easing with job growth slowing, but it was not failing. They expect the Consumer Price Index (CPI) for June to be another positive indication of disinflation, potentially leading to earlier Fed action.
Analysts said they expected the June CPI report to be soft, increasing the Fed’s confidence in disinflation. Their forecast predicted a slight 0.1% monthly increase in headline CPI due to energy prices continuing to decline.
Although BofA analysts stuck to their December cut projection due to inflation trends, they acknowledge the impact of recent data.
They concluded that the overall softness of the report should mean expectations of a cut this year would remain in market pricing and should keep Sept. live at this stage.
The report underlined the economic cooling confirmed by employment and activity data, possibly leading to the Fed starting its rate cut cycle earlier.
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