Bank of America, BAC, says there will be no Fed rate cuts this year

Bank of America anticipates that the U.S. economy will avoid falling into recession in 2025 and does not foresee any Federal Reserve rate cuts this year, despite growing political tensions and market speculation.

In a research note released Monday, BofA analysts stated, “These developments go in line with our view that the US economy will avoid a recession and the Fed will not cut this year.”

While markets continue to hope for a more dovish Fed stance, BofA points to persistent consumer strength and rising goods inflation as signs of underlying economic resilience.

The bank emphasized that recent inflation figures and retail sales have exceeded expectations. “Goods inflation is picking up and consumer spending remains robust,” the analysts wrote, noting that June’s retail sales control group rose 0.5% month-over-month, and food services advanced by 0.6%.

BofA also cautioned against rate cuts influenced by politics. “Cutting rates to help finance the government deficit is we think probably one of the worst reasons to cut rates,” the analysts wrote, referencing former President Trump’s criticism of Fed Chair Jerome Powell.

“This unnecessary politically driven noise raises the bar for cuts,” the note added.

The bank warned that premature policy easing could backfire—potentially steepening the yield curve in a bearish fashion, weakening the dollar, unmooring inflation expectations, and amplifying credit risk.

Looking ahead, BofA expects a modest uptick in jobless claims for the week ending July 19, and anticipates that housing data will remain stable. The bank also forecasts that Friday’s durable goods orders will show an 11% month-over-month decline.