Bank of America pushes Fed rate-cut timeline to 2027 in revised forecast
- Bank of America dropped its call for 2026 Fed cuts and now expects the next two reductions in July and September 2027. - The shift came after April payrolls rose 115,000, unemployment held at 4.3%, and March CPI stayed at 3.3% year over year. - That matters because the Fed just held rates at 3.50% to 3.75%, and sticky inflation keeps financing costs elevated.
Interest rates are back to being a “higher for longer” story. The new twist is that Bank of America just pushed that idea much further out than most people expected. Its economists now think the Federal Reserve will not cut rates until the second half of 2027 — a sharp change from their earlier view that cuts could come in 2026. ### What changed? Bank of America’s revised call is simple but pretty dramatic. The bank had previously expected rate cuts next year. Now it sees the first two cuts landing in July and September 2027 instead. The logic is that the data still do not give the Fed much reason to ease. (cbsnews.com) ### Why did BofA change its mind now? The jobs report was the immediate trigger. U.S. employers added 115,000 jobs in April, which was better than many forecasts, and the unemployment rate stayed at 4.3%. That is not a booming labor market, but it is firm enough to make the Fed less nervous about cutting too late. ### Isn’t inflation already cooling? (straitstimes.com) Not enough for the Fed’s comfort. March consumer inflation came in at 3.3% from a year earlier, still well above the central bank’s 2% target. Core inflation was 2.6%, which is better, but the bigger point is that price pressure has not clearly settled into a clean path back to target. That makes a rate cut look more like a risk than a rescue. (bls.gov) ### Where is the Fed right now? At its April 29, 2026 meeting, the Fed left the federal funds target range at 3.50% to 3.75%. It also kept the usual message — officials will watch incoming data, the outlook, and the balance of risks before making any further moves. Basically, the door is not shut, but it is definitely not swinging open. (bls.gov) ### Why does a strong jobs number matter so much? Because the Fed cuts when something is breaking, or when inflation is convincingly beaten. Right now neither condition looks fully met. Payroll growth is slower than it was in hotter periods, but it is still positive. Inflation is lower than the worst of the post-pandemic spike, but it is still running above target. That leaves policymakers stuck in the middle — and “wait” becomes the default. (federalreserve.gov) ### Does this mean everyone now expects no cuts until 2027? No — this is a forecast, not a Fed promise. But it matters because Bank of America is one of the big shops institutions listen to, and its shift tells you where the argument is moving. Just a few weeks ago, coverage of BofA’s view still centered on possible 2026 cuts. Now the same bank is saying the economy and inflation backdrop do not support that. (bls.gov) ### What does this mean for actual businesses? Expensive money keeps shaping behavior. If companies think borrowing costs stay elevated for another year or more, they stay cautious on inventory, credit, and hiring. Suppliers tend to protect margins, shorten quote windows, and push harder on payment terms. The effect is not dramatic in one day — but over time it makes the whole operating environment tighter. (finance.yahoo.com) This last point is an inference from the rate outlook and broader financing conditions. ### So what’s the bottom line? Bank of America is not saying a cut is impossible before 2027. It is saying the burden of proof has shifted hard. As of May 9, 2026, the combination of 115,000 April jobs, 4.3% unemployment, 3.3% inflation, and a Fed still sitting at 3.50% to 3.75% makes patience look more likely than relief. (bls.gov) (federalreserve.gov)
