United States Bank: Fed Unlikely to Cut Rates Before 2027

May 9 — Bank of America’s latest forecast projects the Federal Reserve will hold off on interest rate cuts until the second half of 2027, citing persistent high inflation and robust job growth as key drivers. BofA’s Global Research team had previously predicted rate cuts in September and October of this year, hinging on the assumption that former President Trump’s nomination of Kevin Warsh to replace Jerome Powell as Fed chair would usher in a more dovish monetary policy stance. But as economic conditions have shifted, that outlook has changed. BofA economists now note: “We no longer expect the Fed to cut rates at all this year.” They also highlight that several economic headwinds — including the Iran conflict, tariffs, and the rise of artificial intelligence — have made forecasting rate moves increasingly challenging. Notably, larger divergences in Fed rate decisions typically lead to longer stretches of unchanged policy. At the Fed’s latest FOMC meeting in April 2026, an 8-4 vote marked the largest dissent since 1992 — raising hurdles to reaching consensus on rate changes. This widening divergence has favored maintaining the status quo via “inertia,” with policy often holding steady longer to wait for more data to clear up uncertainty.