Brian Moynihan, a top executive at Bank of America, recently stated that the institution’s economists do not anticipate any interest rate cuts by the U.S. Federal Reserve (Fed) this year. According to Moynihan, due to persistent inflationary pressures and the overall resilience of the U.S. economy, the Fed might only consider cutting rates in 2026.
Anticipations for Fed’s Interest Rate Policy
In an interview with CNBC, Moynihan emphasized that the Fed would not rush into any decisions regarding interest rate cuts. He also mentioned that the institution’s economists do not foresee any recession throughout 2025 and predict that growth will remain within the 1 to 1.5 percent range by year’s end. These economists argue that inflation requires more time to reach target levels, which could postpone potential rate cuts until 2026.
Brian Moynihan: “Our economists believe there will be no recession. They expect the U.S. economy to grow between 1 to 1.5 percent this year. Due to prolonged high inflation, Fed will not reduce interest rates in 2025; instead, such measures might be considered in 2026.”
Consumer and Labor Market Indicators
Moynihan highlighted a remarkable growth exceeding 5 percent in consumer spending when comparing July 2025 to July 2024. He noted that despite a 30 percent decrease in the use of personal credit lines compared to pre-pandemic times, the credit quality of the bank’s customer base and the overall industry remain robust, with consumers maintaining strong financial capacity.
Brian Moynihan: “Comparing July 2025 with July 2024, our customers contributed more than 5 percent to the economy. The credit quality of our client base is solid, which is true for the industry as well. Mortgage borrowing remains 30 percent below pre-pandemic levels, with home prices increasing. There is capacity. The U.S. unemployment rate is around 4.2 percent, indicating a full employment scenario.”
Market Sentiment and Discrepancies in Expectations
In contrast, market indicators and analytical tools sometimes present an opposing view to that of Bank of America’s economists. According to CME Group’s FedWatch Tool, there’s a 91.2 percent probability that the Fed will lower its policy interest rates by 25 basis points at the Federal Open Market Committee (FOMC) meeting in September. This expectation has been strengthening, especially following the recent employment data release.
The latest employment report revealed that non-farm payrolls increased by 73,000 in July, falling short of Dow Jones’ projection of 100,000. This development has led some market participants to speculate that the Fed might be closer to cutting rates.
In summary, Bank of America’s assessments point to ongoing economic growth and inflation trending above expectations. These factors may suggest a cautious approach in Fed’s interest rate strategy, while market expectations consider an earlier rate cut possibility. Upcoming Fed decisions will be closely monitored in the following months.
