FX.co ★ BofA bets Fed rate hike cycle coming to end

The experts at BofA Global Research have boldly forecasted the end of the Federal Reserve's rate hike marathon, but they also noted the regulator still has room to maneuver. This revelation marks a turning point in the ongoing narrative of U.S. monetary policy, blending cautious optimism with a dash of uncertainty.

Analysts at BofA Global Research, interpreting recent economic indicators, suggest that the Fed is unlikely to pursue further rate hikes. This assessment is grounded in the October Consumer Price Index (CPI) data from the United States, which remained unchanged from September 2023. This stagnation in CPI growth, following an increase in the previous month, is seen as a key factor influencing the Fed's decision-making process.

The market, in response to these developments, is bracing for a new phase of monetary policy. Participants are increasingly anticipating a shift towards reducing interest rates as early as May 2024. This expectation represents a significant turnaround from the previous trend of rate increases.

Initially, BofA had considered the possibility of an additional rate hike in December of this year. However, this view has evolved, with the current consensus pointing towards the likelihood that the December meeting will focus more on future policy directions rather than immediate rate increases. This shift in perspective reflects a broader reassessment of the economic landscape and the Federal Reserve's policy priorities.

Not all financial institutions share BofA's outlook, however. Barclays Bank expresses a more cautious stance, suggesting that the rate hike cycle may not be conclusively over. Barclays' analysts are projecting another potential rate increase in January 2024. This divergent view is based on a belief that the easing of price pressures, as suggested by some, may be overstated. Barclays points to persistent strength in economic activity and labor markets as factors that could justify continued vigilance on inflation and further rate adjustments.