Bank of America Adjusts Rate Cut Expectations: No Cuts Expected This Year Amid Inflation and Employment Stability

On May 9, Bank of America’s latest forecast indicated that the Federal Reserve will delay interest rate cuts until the second half of 2027, primarily due to high inflation levels and strong employment growth. Previously, Bank of America’s global research department had anticipated that the Fed would cut rates once in both September and October this year, based on expectations that Trump would nominate Kevin Warsh to replace Powell as Fed Chair, leading policymakers to adopt looser monetary policy. However, with changing economic conditions, this outlook has shifted. Bank of America economists now state, ‘We no longer expect the Fed to cut rates this year.’ They also noted that multiple factors impacting the economy, including the war in Iran, tariffs, and the rise of artificial intelligence, have made predicting rate changes more challenging. Greater divergence in the Fed’s rate decisions often leans towards maintaining rates for a longer period. In the recent April 2026 FOMC meeting, the Fed recorded its largest divergence since 1992 with an 8-4 voting result, making it increasingly difficult to reach a consensus on rate adjustments, which in turn promotes a ‘status quo’ inertia, leading policies to ‘pause’ at current levels for a longer time while awaiting more data to resolve uncertainties.