Bank of America Pushes Fed Rate Cuts to 2027 as Inflation Persists
Bank of America said it now expects Fed rate cuts to begin only in mid-2027, delaying its prior forecast for late 2026. The bank cited persistent inflation and a hawkish stance from the Federal Reserve, which has kept policy rates at 3.5%–3.75% since December 2025.
The revision is tied to stronger private payroll growth and stable unemployment, reducing urgency to cut rates. It also points to geopolitical pressure—especially the US–Iran conflict—raising energy prices and keeping inflation above the Fed’s 2% target.
Crypto traders should note that Fed rate cuts expectations are being repriced toward “no cuts” in 2026. In the article’s market snapshot, the “Fed rate cuts in 2026” contract shows about a 57.9% probability of no cuts. Short-dated timing also looks less supportive, with only ~2.6% probability for a cut by June 2026.
What to watch next is renewed Fed communication from Chair Jerome Powell and upcoming inflation and employment data, plus any escalation/de-escalation in the Iran conflict. If the Fed keeps rates higher for longer, the discount rate for risk assets typically rises and market volatility can increase—an effect that can shape both short-term and longer-term crypto trends tied to liquidity expectations.
In short: expectations for Fed rate cuts are moving later, and the macro impulse looks restrictive.
Bearish
This news is likely bearish because it strengthens the case for “higher for longer.” Bank of America’s shift to expecting Fed rate cuts only in mid-2027 reinforces a hawkish regime where real yields and the discount rate for risk assets stay elevated.
In similar past episodes, when markets moved toward delayed or fewer Fed rate cuts, crypto typically saw weaker upside momentum and higher volatility—especially in the short term—because liquidity expectations deteriorate. The article’s own market snapshot supports that framing: the 2026 no-cuts probability is around 57.9%, and a June 2026 cut looks unlikely (~2.6%).
Short-term impact: traders may reduce risk exposure, favoring defensive positioning until clearer easing signals emerge. Long-term impact: if restrictive policy persists, sustained liquidity conditions can cap valuations and slow trend reversals. However, if inflation later cools or the Fed signals earlier easing, the same traders may rotate quickly back into risk assets, so follow-up macro prints (CPI, jobs) and Powell’s messaging will be decisive.