BofA pours cold water on what's next for rates under Powell

Core Viewpoint - Bank of America indicates that the Federal Reserve is unlikely to continue cutting interest rates, with expectations of rates remaining unchanged during Jerome Powell's tenure until May 2026 [1][2][6] Interest Rate Outlook - Economists at Bank of America predict that the Fed will maintain interest rates at its January 28 meeting and potentially throughout Powell's term, aligning with the Fed's December dot plot which suggests only one rate cut in 2026 [2][4] - The CME's FedWatch tool reflects that traders have pushed the timeline for any significant rate relief to June at the earliest [2] Impact on Borrowers - The current situation poses challenges for homebuyers and families looking to refinance, as the anticipated relief from rate cuts may have already occurred, leaving borrowers in a "higher-for-longer" environment [3][4] - The December jobs report indicated a decrease in the unemployment rate to 4.4%, which is expected to keep the Fed on hold in January, reinforcing the view that no further cuts will occur under Powell [4][6] Economic Context - The Fed's dual mandate of low inflation and low unemployment faced significant challenges in 2025, with inflation rising from 2.3% in April to 2.7% in November, while unemployment peaked at 4.6% before a recent decline [4][5] - Powell's cautious approach to rate cuts, particularly in light of inflation concerns, may have contributed to his precarious position as his term nears its end [5][6]