Brian Moynihan, CEO of Bank of America, shared the bank's forecasts regarding the Fed's interest rates and economic trends in the US.
Factors Influencing Fed Decisions
Brian Moynihan, representing the bank's economists, stated that no interest rate cuts are expected this year. The main reasons for this are ongoing inflation issues and the stable performance of the US economy.
> Brian Moynihan: "Our economists believe there will be no recession. They expect the U.S. economy to grow between 1 to 1.5 percent this year. Due to prolonged high inflation, Fed will not reduce interest rates in 2025; instead, such measures might be considered in 2026."
Consumer Trends and Economic Health
Moynihan pointed out that consumer spending increased by over 5 percent from July 2024 to July 2025, marking significant economic resilience. Despite a 30 percent drop in personal credit line usage, consumer creditworthiness remains strong. The unemployment rate also sits at around 4.2 percent, indicating full employment.
> Brian Moynihan: "Comparing July 2025 with July 2024, our customers contributed more than 5 percent to the economy. The credit quality of our client base is solid, which is true for the industry as well. Mortgage borrowing remains 30 percent below pre-pandemic levels, with home prices increasing. There is capacity. The U.S. unemployment rate is around 4.2 percent, indicating a full employment scenario."
Market Expectations vs. Bank of America Predictions
There is a noticeable gap between market sentiment and Bank of America's forecasts. The CME Group’s FedWatch Tool indicates a 91.2 percent likelihood of a 25 basis point rate cut by September’s Federal Open Market Committee meeting. Recent employment figures showing a shortfall in job creation have fueled speculation about an earlier-than-anticipated rate reduction.
Recent employment figures revealed a 73,000 increase in non-farm payrolls for July, significantly below Dow Jones’ forecast of 100,000. Such data further fuels market speculations that the Fed might reconsider its current rate stance sooner than suggested by Bank of America’s forecasts.
Taking into account these insights, it is clear that: * Bank of America anticipates continuous economic growth with above-target inflation levels. * Fed’s rate cut is seen as likely postponed until 2026 by the bank’s economists. * Market indicators suggest a possible rate cut in September, contrary to Bank of America’s predictions. * Consumer spending and employment trends underscore economic resilience.
The expectations regarding the Fed's next moves contrasted with Bank of America's predictions create an intriguing dynamic that will be closely observed in the coming months.
