Bank of America revises its interest rate cut forecast, now predicting a 25 basis point reduction in September followed by another cut in December due to slowing economic growth and market reactions.
Points
- Bank of America predicts interest rate cuts in September and December.
- The revision follows a slowdown in economic growth and market reactions.
- Analysts highlight the impact of non-farm payroll data on the forecast.
- The expected cuts aim to address growth panic and increase in bond prices.
In a significant revision to its economic outlook, Bank of America now predicts that the Federal Reserve will implement a 25 basis point interest rate cut in September, followed by another reduction in December. This adjustment comes as the bank responds to a noticeable slowdown in economic growth and heightened market reactions.
Wasif Latif, president and chief investment officer of Sarmaya Partners, commented on the U.S. July non-farm payrolls data, describing the current market reaction as a “growth panic.” Latif suggested that the market has recognized a slowdown in economic growth, which could pressure the Fed to reduce interest rates sooner than previously expected. He noted that historical delays in the Fed’s rate adjustments have often led to slower economic growth, reinforcing the need for timely intervention.
Latif also emphasized that the current state of anxiety in the market has caused a shift towards high-quality assets, leading to anticipated increases in bond prices.
Simcorp’s applied research manager, Melissa Brown, shared her views on the non-farm employment data for July, which came in below expectations
. She highlighted that this unexpected data reinforces the likelihood of the Federal Reserve considering rate cuts to support the slowing economy.
“The market’s reaction to the non-farm payroll data has been significant, indicating a broader concern over economic slowdown,” Brown noted.
Bank of America analysts pointed out that while a December rate cut was initially forecasted, the shift to include a September cut reflects a more immediate response to the economic indicators and market sentiment. This dual approach aims to mitigate the risks associated with prolonged economic stagnation and to bolster market confidence.
解説
- Bank of America’s revised forecast underscores the dynamic nature of economic policy-making in response to real-time data.
- The anticipation of rate cuts highlights the Fed’s proactive measures to sustain economic growth amidst slowing indicators.
- Analysts’ insights emphasize the importance of non-farm payroll data as a key economic indicator influencing monetary policy decisions.
- The expected rate cuts in September and December reflect a strategic approach to preempt potential economic downturns and stabilize market conditions.