BofA Securities Reaffirms No Fed Rate Cuts in 2025 Despite Soft Jobs Data

✅Key Takeaways

• BofA Securities sticks with forecast: no Fed rate cuts in 2025
• July jobs report weaker than expected, with steep downward revisions for May and June
• Fed Chair Powell likely to tolerate weak job growth if unemployment remains stable
• Inflation remains stubbornly above the Fed’s 2% target, limiting rate cut prospects
• Immigration restrictions tighten labor supply despite weakening demand

BofA Securities Maintains Fed Will Hold Rates in 2025

Bank of America Securities (BofA) has reaffirmed its expectation that the Federal Reserve will not cut interest rates in 2025, despite growing market speculation for a rate cut as early as September. This comes after the July jobs report showed the U.S. labor market added fewer jobs than forecast.

The U.S. Bureau of Labor Statistics’ data revealed deep downward revisions for payrolls in May and June, signaling the labor market’s resilience may have been overstated amid tariff-driven trade tensions earlier this year.

💡Labor Market Weakness Challenges Rate Cut Expectations

Analysts at BofA, led by Aditya Bhave, acknowledge that the disappointing payroll data challenges their outlook. They admit the probability of “bad cuts”, rate reductions caused by labor market deterioration, has increased. However, they emphasize they remain committed to their original call of no interest rate cuts in 2025 for now.

“Markets are conflating recession with stagflation, a scenario of high inflation alongside weak economic growth,” BofA said.

Immigration and Inflation Are Key Factors

BofA analysts highlight how immigration restrictions have significantly reduced the foreign-born workforce by 802,000 since April, tightening labor supply. Despite weakening job demand, slack in the labor market has not increased, with the unemployment rate and job vacancy ratio remaining stable over the past year.

Meanwhile, wage growth and aggregate labor income remain robust, adding complexity to the Fed’s policy decisions.

Fed Chair Jerome Powell has indicated a willingness to “look through weak job growth” if unemployment remains “range bound.”

Read More: Weak Jobs Report and Trump’s New Tariffs Shake Global Markets

Inflation Remains the Fed’s Primary Concern

Inflation stubbornly above the Fed’s 2% target remains the major hurdle for rate cuts. The Fed’s current “wait-and-see” stance stems from cautiousness around inflation trends rather than labor market weakness.

“If the Fed cut rates in September, it would be betting heavily on labor market deterioration without evidence that inflation has peaked,” BofA warned.

✅Employment and Inflation Snapshot

💬Conclusion

While July’s soft jobs data and payroll revisions have sparked speculation about potential Fed rate cuts, BofA Securities remains cautious, emphasizing persistent inflation and tight labor supply as key reasons the Fed will likely keep rates steady in 2025.

🔎 What are your thoughts on the Fed’s policy direction? Do you expect rate cuts soon? Share your opinions below or spread the word by sharing this article!

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