BOA and Goldman push back Fed rate‑cut expectations on inflation risks, jobs data

[BENGALURU] Bank of America (BOA) Global Research and Goldman Sachs are the latest brokerages to revise their US Federal Reserve rate calls to later dates, citing elevated inflation due to high energy prices and growing strength in the labour market.

BOA Global Research now expects the Fed to remain on hold for the rest of 2026, with two 25 basis point cuts in July and September 2027. Goldman Sachs forecasts cuts in December 2026 and March 2027, against its earlier forecast of a first rate cut in September 2026.

A host of global brokerages have recast their projections for US rate cuts in 2026, split between some easing and no cuts at all, as the 10-week-old Middle East war has pushed energy prices higher and left policymakers cautious about inflation risks.

Data on Friday (May 8) showed US employment increased more than expected in April and the unemployment rate held steady at 4.3 per cent, reinforcing expectations that the central bank would leave interest rates unchanged for some time.

Analysts at Goldman Sachs wrote that “if the labour market does not weaken sufficiently this year, we would instead expect the Federal Open Markets Committee to deliver two final cuts in 2027”, in a note dated May 8.

The Fed held rates steady at its Apr 29 meeting in an unusually divisive eight to four vote, the closest since 1992. US inflation remains well above the Fed’s 2 per cent target.

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Traders expect the central bank to hold interest rates steady in the 3.5 to 3.75 per cent range until the end of the year.

“We think (incoming Fed chair) Warsh will push for lower rates, but the data flow precludes cuts for now,” analysts at BOA said in a note dated May 8.

“However, cuts should be in play by next summer, with inflation much closer to target.” REUTERS