Bank of America is doubling down on its call that the Federal Reserve will not cut interest rates in 2025, underscoring the central bank’s growing discomfort with a dual threat of rising inflation and unemployment revealed at this week’s policy meeting.
In a note shared Thursday, BofA economist Aditya Bhave said the key takeaway from the May Federal Open Market Committee meeting was “an upgrade to the Fed’s assessment of economic uncertainty.”
Bhave referred to two new lines in the Fed’s statement: first, that uncertainty “has increased further,” and second, “risks of higher unemployment and higher inflation have risen.”
Hawkish Tilt As Fed Acknowledges Stagflation Risks
While the Fed kept rates unchanged at 4.25%-4.50%, Chair Jerome Powell’s press conference took a cautious, hawkish tone compared to March.
Powell repeatedly emphasized the central bank’s comfort with staying on hold and made clear that the Fed would not act preemptively—unlike in 2019 when …