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Bank of America has revised its expectations regarding the Federal Reserve’s interest rate reduction process. According to the bank’s latest forecast, no further rate cuts are expected this year due to high inflation and a strong employment outlook. The institution also predicted that rate cuts could be postponed until the second half of 2027.
The bank had previously predicted that the Fed would make two interest rate cuts this year, in September and October, based on the expectation that US President Donald Trump would nominate Kevin Warsh to replace Jerome Powell as Fed Chairman and that Warsh would support looser monetary policies. However, changes in the economic outlook have led to a revision of these expectations.
Bank of America economists stated in their assessment, “We no longer expect the Fed to cut interest rates this year.” The report also added that multiple shocks, such as the Iran war, tariffs, and the economic transformation driven by artificial intelligence, are making monetary policy forecasting difficult.
Economists have stated that increasing disagreements within the Fed could also lead to interest rates remaining at current levels for a longer period. The 8-to-4 decision at the final Federal Open Market Committee (FOMC) meeting in April 2026 was recorded as the largest disagreement since 1992.
According to the report, increasing disagreements among policymakers are reinforcing the Fed’s “wait-and-see” approach. This could lead to interest rates being maintained at current levels for longer, and monetary policy being postponed until new economic data becomes clearer.
*This is not investment advice.