Investors wait for Federal Reserve Chair Jerome Powell to provide an update on the central bank's next interest rate decision on Wednesday.
Bank of America Securities senior US economist Stephen Juneau tells Brad Smith and Madison Mills on Morning Brief that he doesn't expect the Fed to cut rates in 2025 or in 2026 as it balances its dual mandate.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
The outlook here for the Fed, and it's not likely that we'll see a cut prior to June. At least that's what the Fed watch tool from CME is, is telling us. What is your base case for your anticipated cuts over the course of this year? And what would prompt us to get there?
So we're we're out of consensus. We don't think the Fed's going to cut this year or next really. We think that the Fed's juggling with this problem where even if you got weaker growth, well, you're likely going to see higher inflation. So they're balancing their dual mandate and they're likely to lean on the fact that, hey, we have an inflation mandate, we're not comfortable unless we see growth really deteriorate to kind of move quickly and cut quickly. So for us, we think the Fed and the general economy will be supportive of current rates and the Fed won't move because inflation's going to be stuck around two and a half to 3%, growth is going to be positive, maybe maybe a one handle, but probably a two handle, and that's going to allow the Fed to just stay on hold for the rest of the year. What would get us there is if we those downside risk that you're discussing so much, if we see that emerge and actually drive activity weaker, we see that unemployment rate rise more quickly, then I think that's where you get the Fed to move a little more quickly and they probably cut more than what the market's pricing in that event.