BofA pushes Fed cuts into 2027

Interest rates are back to being the whole story. Not because the Fed changed anything last week, but because Wall Street keeps moving the first cut farther into the future. Now Bank of America has gone further than most big houses and pushed its first expected Fed cut into 2027, not 2026. That sounds like a forecast tweak. But basically it is a statement that inflation is proving sticky enough, and growth resilient enough, that “higher for longer” may last a lot longer than investors wanted. ### What actually changed? Bank of America’s economists now expect the Fed to hold the policy rate steady through the rest of 2026 and then cut twice in 2027 — once in July and once in September, both by 25 basis points. Goldman Sachs also pushed its call later, but not nearly as far, with a first cut in December 2026 and another in March 2027. So the new story is not just “cuts delayed.” It is that major forecasters are splitting on whether the next move is still a 2026 event at all. (money.usnews.com) ### Where is the Fed right now? The Fed held its target range at 3.5% to 3.75% at the April 28–29 meeting. In the statement, officials kept the usual line that future moves depend on incoming data, the outlook, and the balance of risks. That is careful Fed language, but the practical read is simple — policymakers do not think they are under pressure to cut quickly. (money.usnews.com) ### Why are banks pushing cuts out? Because the two things that usually force the Fed’s hand are not lining up. Inflation is still not convincingly back at 2%, and the labor market has stayed firm enough to weaken the case for emergency-style easing. Add in higher energy prices and the risk is that inflation stops cooling or even re-accelerates. If that happens, the Fed’s problem is not when to cut. It is whether staying restrictive still is not restrictive enough. (federalreserve.gov) ### Why does the BofA call stand out? Because it is not just “later.” It is a different regime call. A December 2026 first cut says the Fed eventually gets enough disinflation to start normalizing. A July 2027 first cut says the economy may spend another full year with policy basically frozen at restrictive levels. That is a much harsher message for rate-sensitive bets — housing, small caps, long-duration tech, and the whole trade built on cheaper money arriving soon. (money.usnews.com) ### What are markets pricing? Market-implied paths have also shifted out, though they do not cleanly match any one bank’s forecast. CME’s FedWatch tool shows traders using fed funds futures to estimate the odds of moves at upcoming meetings. Other live probability trackers built off the same futures market show little expectation of near-term cuts and even some pricing for higher rates later this year. The point is not the exact percentage on one screen. (money.usnews.com) The point is that the market has stopped treating cuts as imminent. ### Why does that hit stocks and bonds? Bonds care because later cuts mean yields can stay elevated for longer. Stocks care because high rates compress valuations and keep financing expensive. Companies that need refinancing, households shopping for mortgages, and investors hoping for a broad multiple expansion all feel the same pressure. Higher-for-longer is not one trade — it is a tax on a lot of optimistic assumptions. (cmegroup.com) ### Could the Fed still cut sooner? Yes — if growth cracks, unemployment rises fast, or inflation suddenly cools. But that is the catch. Right now the incoming story is the opposite: decent jobs, persistent price pressure, and no clear forcing event. That is why forecasters keep backing away from their earlier cut calls. ### Bottom line (msn.com) BofA’s shift into 2027 matters because it turns a timing debate into a regime debate. The question is no longer just when the first cut lands. It is whether the U.S. is settling into a much longer stretch where money stays expensive, and the Fed is in no hurry to change that. (cbsnews.com)