Bank of America Adjusts Rate Cut Prediction to December After March CPI Report

Bank of America has shifted its expectations for a rate cut, now predicting one in December due to the March CPI report exceeding forecasts, while previously expecting a rate cut in June. U.S. economist Michael Gapen mentioned the possibility of inflation pushing cuts into 2025, adding to the caution about a potential June rate cut. Chief economist for Comerica Bank, Bill Adams, stated the likelihood of the Fed waiting until the third quarter to begin reducing interest rates, further contributing to the shift in projections.

Key Takeaways

• Bank of America shifts rate-cut expectations from June to December due to hotter-than-expected March CPI report.
• Upside surprises to inflation could further delay rate cuts into 2025, according to U.S. economist Michael Gapen.
• Chief economist for Comerica Bank, Bill Adams, predicts the Fed will likely wait until the third quarter to begin reducing interest rates.

News Content

Bank of America has shifted its predictions for a rate cut by the Federal Reserve to December, following a stronger-than-anticipated March CPI report. The bank initially anticipated a rate cut in June, but now foresees it being pushed back to December, attributing the delay to potential inflationary upside surprises.

Additionally, other industry experts, including Comerica Bank's chief economist Bill Adams, are casting doubt on the likelihood of a June rate cut, suggesting that the Fed will probably wait until the third quarter to commence interest rate reductions. Overall, the March CPI report has led to significant adjustments in Wall Street's expectations regarding the Federal Reserve's interest-rate policy.

Analysis

The shift in Bank of America's rate cut prediction to December, following a stronger-than-anticipated March CPI report, is likely to impact financial markets and the Federal Reserve's interest-rate policy. This change may have direct consequences for investors, affecting their investment strategies and risk assessments. The delay in the rate cut could influence consumer spending and business investment in the short term, while potentially impacting inflation and economic growth in the long term. Organizations and individuals involved in financial markets, as well as policymakers at the Federal Reserve, will need to adjust their strategies and decisions based on these revised predictions.

Did You Know?

• Federal Reserve Rate Cut:

  • The Federal Reserve is the central bank of the United States and is responsible for setting interest rates. A rate cut refers to the Fed's decision to reduce the interest rate, making borrowing cheaper for businesses and consumers. This can stimulate economic growth and investment.

• Consumer Price Index (CPI) Report:

  • The CPI report measures changes in the cost of living for consumers and is an important indicator of inflation. A stronger-than-anticipated CPI report suggests that prices are rising at a faster rate than expected, which could lead to concerns about potential inflationary pressures.

• Wall Street's Expectations:

  • Wall Street refers to the financial markets in New York City and is a key indicator of overall market sentiment. Adjustments in Wall Street's expectations regarding the Federal Reserve's interest-rate policy can have significant implications for stock prices, bond yields, and overall market stability.