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Fed Rate Cuts Delayed: 2027 Outlook
9 May
Summary
- Bank of America predicts Fed rate cuts delayed until late 2027.
- Stubborn inflation at 3.3% remains above the Fed's 2% target.
- April jobs report showed 115,000 new positions added.
Bank of America Global Research now anticipates that the Federal Reserve will not lower interest rates this year, pushing potential cuts to the second half of 2027. This revised outlook stems from multiple economic shocks, including geopolitical events and technological advancements, complicating monetary policy forecasts.
Several factors impede potential rate cuts. Despite some Fed officials signaling openness to easing, many remain hesitant, particularly with concerns that AI-driven productivity could overheat the economy. Inflation remains a significant hurdle, standing at 3.3%, well above the Fed's 2% annual target, and has been exacerbated by rising energy prices linked to geopolitical tensions.
Furthermore, a robust jobs report released recently showed employers adding 115,000 positions in April, exceeding expectations. This strong labor market performance reinforces the Federal Reserve's focus on controlling inflation, with projections indicating that consumer prices will likely stay above the 2% target for the next year. The last rate adjustment by the Federal Open Market Committee was a quarter-percentage-point cut in December 2025.
