A recent Bank of America survey of global fund managers found that a majority of investors predict the Fed will cut interest rates in 2025.
Survey Results
According to the survey conducted in February, 77% of fund managers expect a rate cut, while 46% predict two cuts, 27% one cut and 4% three cuts. Meanwhile, 19% of respondents believe interest rates will remain unchanged, while only 1% predict a rate hike.
Inflation's Impact on the Market
The rate cut expectations come amid ongoing inflationary pressures. January inflation figures that beat estimates led to a sharp decline in stock markets and a rise in borrowing costs. These market moves reflect concerns that the Fed could keep rates high for longer than previously expected.
Expert Opinions
Bill Adams, chief economist at Comerica Bank, said the latest inflation data supports the view that underlying price pressures remain a problem. He noted, "The Fed will view the January high inflation data as confirmation that price pressures continue to bubble beneath the surface of the economy." This could reinforce the Fed’s intention to at least slow and possibly even end rate cuts in 2025.
RSM US chief economist Joseph Brusuelas shared a similar view, revising his forecast to a single rate cut in December.
The survey results among fund managers are summarized, market implications are discussed, and expert opinions on the prospects for interest rate changes are provided.
