Bank of America, Which Expected a Rate Cut in December for the First Time, Changes Its Forecast

Bank of America expects the Fed to cut interest rates by 25 basis points in September and cut rates further in December. The bank’s revised outlook represents a change from its previous expectation that rates would only be cut in December.

Wasif Latif, chairman and chief investment officer of Sarmaya Partners, commented on the US nonfarm payrolls data for July, describing the current market reaction as a “growth panic.” Latif suggested that the market is realizing that economic growth is slowing and that the Fed may be under pressure to cut rates quickly. He noted that historically, delays in Fed rate adjustments have led to slower economic growth and that the current data could prompt a rate cut in September.

However, Latif also stressed that the current state of market anxiety has caused a shift towards higher quality assets, leading to expected increases in bond prices.

Melissa Brown, Simcorp applied research manager, shared her views on the July nonfarm payrolls data, which came in below expectations but remained positive. Brown stated that although employment growth was lower than expected, it was not at a level that would indicate a recession. She noted that the unemployment rate was higher than expected but still relatively low. Stating that more data would come before the FED’s next meeting, Brown suggested that while a 50 basis point interest rate cut is possible, it is unlikely due to the FED’s cautious stance. Brown emphasized the importance of the upcoming inflation report, which will provide important information on the balance between general inflation and income growth.

*This is not investment advice.