Bank of America warns that inflation continues to exceed the target and tariffs are raised, and the Federal Reserve has insufficient reasons to cut interest rates in September

The US Federal Reserve should refrain from cutting interest rates at its September policy meeting as recent economic data do not support a premature start to the easing cycle, Bank of America said in its latest research note. The bank stressed that policymakers in favour of the rate cut had underestimated the impact of the labour supply shock and the stubbornness of inflation, which remains above the Fed's 2 per cent target. The report warned that the latest tariff hike could have a "sharper and more lasting impact" on prices. "A rate cut in September risks an easing cycle before inflation has peaked," BofA's analysts wrote, maintaining their baseline forecast of "no rate cuts this year". In particular, the bank pointed out that the downward revision in the US non-farm payrolls data increased the likelihood of so-called "passive rate cuts" - rate cuts driven by a worsening labour market rather than by gains in fighting inflation.