Bank of America’s economists are predicting that the Fed will not cut rates this year, according to the lender’s CEO Brian Moynihan.
In a new CNBC interview, Moynihan says that the bank’s economists believe inflation pressures will cause the Fed to hold off cutting rates until 2026 as the economy remains healthy.
“Our economists believe there’ll be no recession. They believe the economy in the US will grow about 1%-1.5% this year. They believe that the Fed will not cut rates because inflation will take longer to get down during ’25. They’ll cut them in ’26. They’ve been on that for a long time. And even when the tariffs came in, they said all that caused economic less economic growth this year than they otherwise scheduled, but still no recession.”
He also says that the Fed will likely not be in a rush to cut rates this year because economic indicators remain strong with consumer spending up, unemployment low and credit capacity high.
“For the month of July 2025 versus the month of July 2024 our consumers pushed 5% more plus in the economy from their accounts…
Credit quality of our customer base is very strong, and in the industry is very strong… Lines of credit usage for consumers, for the home equity loans, are still down 30% from where they were pre-pandemic, and house prices have gone up. So the capacity is there…
The unemployment rate in the US at 4.2% plus or minus is full employment. And what our economists actually say is the supply of labor is going to be a constraint on job growth, not the demand for labor.”
Meanwhile, the CME FedWatch Tool, which generates probabilities using the 30-day Fed Funds futures prices, estimates at time of writing that there’s a 91.2% chance the Fed will cut the federal target rate by 25 basis points at the Federal Open Market Committee (FOMC) meeting in September.
The rate cut probability soared after the recent labor report indicated total non-farm payroll employment increased by 73,000 jobs in July, less than the Dow Jones estimate of 100,000.
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