• Bank of America CEO Brian Moynihan predicts the Federal Reserve will hold rates steady throughout 2025, a stark contrast to market expectations.
  • The bank's economists project inflation will not be fully tamed until "really through the end of '26 into '27 down to the 2% level."
  • Despite weak recent employment data, BofA reports strong underlying consumer health with spending up 5% year-over-year.

Bank of America Corp. Chief Executive Officer Brian Moynihan has staked out a decidedly hawkish position on monetary policy, forecasting no interest rate cuts from the Federal Reserve in 2025. This outlook places one of Wall Street's most influential voices directly at odds with market pricing, which currently shows a 91.2% probability of at least a 25 basis point cut by September of next year.

Moynihan's stance, detailed in recent briefings, emphasizes the Fed's need to maintain its cautious approach until inflation is convincingly defeated. "Inflation must be removed from the system really through the end of '26 into '27 down to the 2% level" before policymakers would consider easing, he stated, according to people familiar with his comments. This extended timeline suggests a much longer period of restrictive monetary policy than many investors currently anticipate.

The divergence between institutional forecasts and market expectations creates significant uncertainty for investors navigating the rate environment. While Bank of America and Morgan Stanley both predict no 2025 rate cuts, market pricing tells a different story, potentially setting up volatility around Fed policy announcements. This tension was exacerbated by July's non-farm payroll increase of just 73,000, which fell well below expectations and fueled arguments for more dovish policy.

Despite these macroeconomic crosscurrents, Bank of America's internal data paints a picture of remarkable consumer resilience. Spending among the bank's customers rose 5% between July 2024 and July 2025, while personal credit line usage has dropped by 30% since pre-pandemic levels. Credit quality remains robust across the bank's customer base, indicating broad-based financial health that may give the Fed more room to maintain higher rates.

The bank's economists believe the Fed will eventually begin cutting rates, but not until the middle of next year, with a target of normalizing around 3% to 3.5% - higher than pre-global financial crisis levels but more reflective of what they see as a healthier economic baseline. This suggests a structural shift in monetary policy frameworks compared to the ultra-low rate environment of the 2010s.

Adding complexity to the outlook are potential tariff policies that could create additional inflationary pressure. Estimates suggest tariff costs could reach $360 billion annually, creating what would amount to one of the largest tax increases in history and further complicating the Fed's inflation management challenge.

Bank of America projects modest economic growth of 1% to 1.5% for 2025, with no recession expected through the end of the year. The unemployment rate continues to hover around 4.2%, consistent with full employment, while steady 2% growth is expected for both 2025 and 2026.

When reached for additional comment on the divergence between their forecast and market expectations, a Bank of America spokesperson referred back to Moynihan's recent public statements. The tension between institutional economic analysis and market pricing sets the stage for continued volatility as investors recalibrate their expectations for the duration of the Fed's restrictive policy stance.