• Bank of America economists project no Fed rate cuts until 2026, citing persistent inflation and economic resilience.
  • CEO Brian Moynihan highlights strong consumer spending as a key factor supporting higher-for-longer rates.
  • Markets adjust expectations as major banks align on a gradualist approach to monetary easing.

A Longer Wait for Rate Relief

Bank of America CEO Brian Moynihan doubled down on his institution's contrarian outlook for Federal Reserve policy, telling reporters Wednesday that the bank's economists don't anticipate any rate cuts before 2026. This projection puts BofA at the more hawkish end of Wall Street forecasts as markets gradually recalibrate expectations for monetary easing.

"Our economists continue to believe we won't see cuts until '26," Moynihan said during a briefing at the bank's New York headquarters. "Consumers continue to spend pretty strongly, and that economic strength gives the Fed room to maintain its current stance."

The comments come as BofA's trading division reports record second-quarter performance, with fixed income, currencies and commodities revenue jumping 19% to $3.25 billion. This robust activity suggests financial markets are adapting to the higher-rate environment, even as borrowers face continued pressure.

Inflation Trumps Growth Concerns

Behind BofA's outlook lies a fundamental reassessment of post-pandemic economic dynamics. Where many analysts previously expected inflation to quickly retreat to the Fed's 2% target, Moynihan pointed to structural factors - including labor market tightness and supply chain reorganizations - that may sustain price pressures.

"We're not seeing the deterioration in economic data that would prompt earlier easing," said one BofA economist familiar with the models, speaking on condition of anonymity. "If anything, the risk is we might need to push our forecast back further."

Market indicators appear to be catching up to this view. Futures pricing now shows investors assigning less than 50% odds of even a single quarter-point cut in 2025, a stark reversal from earlier expectations of multiple reductions.

Global Implications

The delayed easing timeline carries consequences beyond U.S. markets. A stronger-for-longer dollar could pressure emerging market currencies and complicate debt refinancing for developing nations. In Europe, central bankers monitoring Fed policy may face constraints on their own easing cycles.

Moynihan emphasized the Fed's need to maintain independence from political pressures, particularly with potential trade policy shifts on the horizon. "Monetary policy needs to stay focused on the long game," he said. "That means not overreacting to short-term data swings."

Bank of America's stance reflects a broader Wall Street consensus forming around the idea that the pre-2020 era of ultra-low rates may not return. As one portfolio manager put it: "The market's finally internalizing that 3% is the new zero."