Bank of America forecasts higher for longer Fed Funds rates, sees upside risks

Bank of America on Fed Funds for next year:

  • We revise our rates forecasts higher across the curve
  • now forecast 10y UST at 4.25% by end ’24
  • Our forecasts are below market forwards but above consensus, especially by end ’24
  • Our 2Y forecasts shade risks to a higher cutting trough than US economics baseline. This is due to risks of a higher nominal neutral rate, which the market currently prices. it also reflects risks that skew to a more resilient economy.

BoA on the risks they see:

  • skewed to the upside
  • We see risk to more growth momentum in rates market, stronger growth will mean higher rates vs our forecast.
  • We also see risks from elevated UST supply which could keep long end US rates higher & the curve steeper vs our forecasts.
  • Downside risks could stem from a sharper US economic slowdown or another round of bank stress

This article was written by Eamonn Sheridan at Source