Bank of America sees rates through 2027

Interest rates are the price of money — and Bank of America just told clients that price may stay high a lot longer than many investors hoped. The new call is blunt: no Fed cuts in 2026, and probably not until the second half of 2027. That is a meaningful shift, because only recently parts of the bank were still talking about room for cuts this year if inflation behaved. (cbsnews.com) Now the story is stickier inflation, firmer jobs data, and a Federal Reserve that still looks more worried about overheating than slowing. ### What changed? BofA Global Research said Friday it no longer expects the Fed to cut rates this year and now sees easing pushed into the second half of 2027. (cbsnews.com) That reverses its earlier expectation for two cuts in 2026, which had partly rested on the idea that a leadership change at the Fed could make policy more dovish. Instead, the bank now thinks the backdrop has moved the other way. ### Why did BofA push the cuts out so far? Basically, inflation is still too hot for comfort. BofA pointed to multiple shocks hitting the economy at once — including higher energy prices tied to the Iran war, tariff effects, and AI-related demand and spending pressures. (cbsnews.com) In that setup, cutting rates too early risks adding fuel to inflation before price growth is clearly back under control. ### How sticky is inflation here? The key number in the new call is 3.3%. That is where inflation was sitting in BofA’s framing — still well above the Fed’s 2% target. BofA’s economists said core inflation is not just high but moving up, which is the exact pattern that makes central bankers reluctant to ease. (cbsnews.com) If inflation were gliding lower, the argument for cuts would be easier. Right now it is not. ### Why does the jobs report matter? Because the Fed cuts more easily when the labor market is cracking. But the latest payrolls data did not show that. Employers added 115,000 jobs in April, above forecasts for 65,000. That is not a booming number, but it is strong enough to weaken the case for emergency-style relief. (cbsnews.com) If hiring is still holding up, the Fed has more room to wait. ### Wasn’t BofA saying something softer before? Yes — and that is part of why this landed so hard. On April 29, Bank of America Private Bank was still saying it saw room for two cuts later in 2026 if inflation stayed contained and geopolitical tensions eased. It also argued the longer-run cutting cycle could continue. (cbsnews.com) So within the broader Bank of America ecosystem, the tone has shifted noticeably in a short span. ### Is BofA alone on this? Not entirely. The same CBS summary of the note said market pricing in CME’s FedWatch tool showed less than a 50% chance of cuts until the second half of 2027. That does not mean everyone agrees on the exact path, but it does show BofA is not making an outlandish call in isolation. (cbsnews.com) ### Why should regular people care? Because “higher for longer” leaks into everything. Mortgages stay expensive. Credit card balances cost more to carry. Companies refinance at higher yields. Banks and bond investors keep earning more on cash-like assets, but borrowers keep feeling the squeeze. The catch is that rates can stay painful even without another hike — just by not coming down. (privatebank.bankofamerica.com) ### Bottom line? Bank of America’s new message is simple: stop assuming relief is around the corner. The Fed may still cut eventually, but BofA now thinks that is a late-2027 story, not a near-term one. If that view sticks, a lot of 2026 bets built around cheaper money will have to be repriced. (cbsnews.com)