Bank of America adjusts Federal Reserve forecast: December is expected to cut interest rates by 25 basis points, 2026 will drop two more

Bank of America Global Research said on Monday that it now expects the Federal Reserve to cut interest rates by 25 basis points at its December meeting in light of weak labour market conditions and recent comments from policymakers suggesting an early rate cut. The bank had expected the Fed to keep rates on hold at its December meeting, and now forecasts another 25 basis point rate cut in June and July 2026, with the final rate falling to a range of 3.00% to 3.25%. "Our forecast for further rate cuts next year is based on leadership changes, not economic interpretation," Bank of America analysts said in a note. Hassett, director of the White House National Economic Council, has reportedly emerged as the hottest candidate to be the next Fed chairperson. BofA added: "We believe that if interest rates are cut next week, the Fed will increase the risk of policy moving into easing territory as fiscal stimulus takes effect." Most large global investment banks currently expect the Fed to cut interest rates by 25 basis points next week, with only a few, such as Morgan Stanley and Standard Chartered, forecasting that rates will remain unchanged. (Jin 10)