Progress in the process of disinflation in the United States has stalled, indicating only one interest rate cut in 2024. Following consumer inflation data above expectations, this is what Bank of America (NYSE:BAC) (BofA) suggests in a note to clients and the market, where it postpones its projection of the beginning of the cycle of rate cuts in the United States from June to December of this year, with risks for a later start.
The bank forecasts a monthly increase of 0.25% for core PCE in March and April, which it assesses as making "a cut as early as June or September unlikely absent clear signs of labor market deterioration," according to economist Michael Gapen.
Federal Reserve officials are not expected to have the necessary confidence that inflation is on a sustainable path to the target in June, according to the bank. "Risks are tilted toward a later start to rate cuts. We still think hikes are low-probability," Gapen adds.
Furthermore, BofA projects a higher terminal rate in 2026 - raising projections by 50 basis points, to the range between 3.5% and 3.75%. "We continue to expect the Fed to cut four times (or 100 basis points) in 2025 and twice (50 basis points in 2026)," BofA concludes.