Bank of America, BAC, has said: We no longer expects more Fed rate cuts

Bank of America, BAC, has said: We no longer expects more Fed rate cuts.

Top Wall Street brokerages have adjusted their Federal Reserve rate cut forecasts following a strong U.S. jobs report on Friday, with BofA Global Research even suggesting the possibility of a rate hike.

“We think the cutting cycle is over ... Our base case has the Fed on an extended hold. But we believe the risks for the next move are skewed toward a hike,” BofA analysts stated in a note.

The jobs data revealed that nonfarm payrolls increased by 256,000 in December, the highest since March. Additionally, data from October and November was revised to show 8,000 fewer jobs added than initially reported. Economists surveyed by Reuters had predicted a gain of 160,000 jobs, with projections ranging between 120,000 and 200,000.

Market sentiment reflected a 76.31% likelihood of a 25-basis-point rate cut by the Fed in June, as indicated by the CME FedWatch tool.

However, J.P. Morgan and Goldman Sachs both pushed their anticipated rate cut from March to June, citing the robust labor market. “We think it would take a very bad set of jobs reports to get the Committee easing again by March,” J.P. Morgan analysts said.

Similarly, Wells Fargo noted that a March rate cut "looks increasingly unlikely," while ING commented that “the risks are increasingly skewed towards an extended pause” due to persistent inflation.

Morgan Stanley, while acknowledging the jobs report could diminish the odds of immediate Fed rate cuts, maintained a nuanced position. “Our more favorable outlook on inflation keeps us thinking a March cut is still more likely than not,” the firm stated.