Bank of America continue to expect the first Fed rate cut in December

Via a note from Bank of America following the CPI report that got everyone expecting quicker rate cuts, again..

This in brief:

  • While the report was certainly a positive one relative to ugly reports to start the year, it is only one month and we think not a big enough step for the Fed to get overly excited.
  • Based on our read-through to PCE inflation, we expect core PCE to print at 023% m/m or 2.8% annualized.
  • Therefore, inflation in April is an improvement from 1Q but is still above the Fed’s 2% target.
  • As a result, we retain our call for the first cut to be in December

Not earlier says BoA:

  • Market pricing on the other hand thinks a cut in September and two cuts this year is very likely. Following the report. markets now price almost 2 full 25bps cuts by the end of the year and more than 85% probability of a cut by the September meeting. We think inflation data will have to slow much more or the labor market data needs to weaken to really bring a September cut into play.

Not gonna cut rates on a marginally improving CPI report. And, let’s face it folks, the improvement was only marginal.

This article was written by Eamonn Sheridan at Source