The inflation fight has stalled and the first rate cut won't happen until December, Bank of America, $BAC, has said

The inflation fight has stalled and the first rate cut won't happen until December, Bank of America, $BAC, has said.

Bank of America has revised its forecast for the first rate cut of 2024, moving it from June to December, due to the recent series of unexpectedly high inflation readings.

In a note on Thursday, BofA's US economics team explained that they believe policymakers will not be confident enough by June to begin loosening monetary policy. However, they maintained their expectations for four cuts in 2025 and two in 2026.

"The acceleration of inflation this year makes a cut prior to December challenging, in our view," analysts led by Michael Gapen wrote. They pointed to the first quarter core CPI inflation, which rose to 4.5% annually from 3.3% in late 2023, as well as high expectations for near-term inflation.

"We think this rationale also rules out cuts that start in July or September. We just don't see enough progress on inflation and its components by then. Moreover, unfavorable base effects mean year-over-year core PCE inflation will probably not decline further between the June and September meetings," the note said.

By December, the bank expects the year-on-year rate of core PCE inflation to be 2.8%. Sequential growth rates in shelter inflation are likely to show more convincing signs of cooling, and inflation expectations are likely to start steadily declining by that point.

"As a result, the Fed could find reason to begin easing rates in December. This would mean one 25bp rate cut this year, instead of our previous forecast of 75bp in rate cuts," analysts added.

Following the release of March CPI, several banks adjusted their rate forecasts. Goldman Sachs lowered its outlook from three to two cuts, while RBC said just one cut is likely.

On Wednesday, Larry Summers, the former US Treasury Secretary, said there are increasing odds that the Fed's next rate move will be upward after inflation came in high for the third consecutive month.