Bank of America delays Fed cut to 2027

Bank of America just made a very aggressive call on U.S. interest rates. Its economists now think the Federal Reserve will not cut until the second half of 2027. That is a big shift from their earlier view, which had cuts starting in late 2026. And it matters because when a bank this large moves that far, it tells you the “higher for longer” story is no longer a fringe view. ### What changed? The immediate news is simple. Bank of America pushed back its expected timeline for Fed cuts to July and September 2027, instead of September and October 2026. In plain English, that is an extra year of waiting for cheaper borrowing costs. ### Why did BofA move so far? Basically, inflation is not cooling fast enough, and the job market is not weakening enough. BofA’s call leans on two things: price pressures that still look too sticky to get inflation back to the Fed’s 2% target, and labor data that still look resilient enough to keep policymakers cautious. If inflation stays around 3%-plus instead of gliding toward 2%, the Fed has very little reason to hurry. (msn.com) ### What did the Fed just do? The backdrop is that the Fed held rates steady at its April 29, 2026 meeting. The official implementation notice kept the interest rate paid on reserve balances at 3.65%, which matches a policy stance that is still restrictive rather than stimulative. So BofA is not fighting the Fed here — it is extending the logic of a central bank that still sees inflation as unfinished business. (cbsnews.com) ### Why is 2027 such a big deal? Because markets and borrowers usually spend most of their time arguing over a few meetings, not a whole extra year. Moving from “cuts later this year” to “cuts maybe next summer” changes how people think about mortgages, credit cards, auto loans, corporate debt, and stock valuations. High rates for longer raise the discount rate on future earnings — that tends to weigh hardest on expensive growth assets. (federalreserve.gov) ### Is Bank of America out on its own? Not really. It is at the hawkish end, but it is moving with a broader shift on Wall Street. Barclays has already moved to a no-cuts-in-2026 view, and other strategists have started openly talking about the possibility that the next move is not even a cut at all. That does not mean hikes are the base case. But it does mean the old assumption — that easing was right around the corner — has weakened fast. (cmegroup.com) ### What are traders pricing now? Markets have also backed away from near-term easing. CME’s FedWatch tool shows traders using fed funds futures to estimate the odds of future moves, and the broad signal has shifted toward more holds and fewer quick cuts. The exact path can change day to day, but the direction is the point — expectations have turned more hawkish, not less. (msn.com) ### What does this mean for regular people? The catch is that Fed forecasts do not just live on trading desks. If cuts get pushed out, borrowing costs across the economy stay higher for longer too. That keeps pressure on monthly payments, slows refinancing, and makes it harder for interest-sensitive sectors like housing to catch a break. It also raises the bar for companies and consumers already financing at expensive rates. ### Bottom line (cmegroup.com) BofA’s new call is less about one forecast and more about a mood change. The easy story — inflation fades, the Fed cuts, relief arrives — is looking less believable. For now, the market is being forced to take seriously a much rougher version of the future: no cuts this year, maybe none next year, and expensive money sticking around well into 2027.