Bank of America Global Research on Friday advanced its estimate for the next Federal Reserve interest-rate cut to October from December, citing evidence of a weakening labor market.
It is the lone large Wall Street brokerage predicting only one additional 25-basis-point cut by the Fed this year, while others like Goldman Sachs and Morgan Stanley anticipate reductions at both of the Fed’s next two meetings.
BofA cautioned there is a danger the Fed might “over-ease.”
The U.S. government shutdown starting on 1st October disrupted the publication of vital economic statistics the Fed uses to consider whether conditions are suitable for a rate cut.
Publication of the highly watched monthly jobs report, set initially for Friday, has been postponed owing to the government shutdown, with investors left to read between the lines of other signs that signal a softening of the labor market and support rate-cut expectations.
BofA asserts the softening labor trend is strong enough to support a rate cut already, whether or not the NFP report is released or not prior to the Fed’s October meeting.
Markets are pricing 98% odds of a 25-basis-point rate cut in October and 90% odds of another like move in December, using CME Group’s FedWatch tool.
