Bank of America pushes out the start of Fed rate cuts, now not until 2028

Bank of America has revised its Federal Reserve rate outlook, arguing that the central bank will not begin cutting interest rates until 2028. In a report carried by Yahoo Finance, the bank’s economists shifted to a “higher for longer” path, forecasting additional hikes before the Fed settles into an extended pause.

Under Bank of America’s updated view, policymakers would raise rates three more times this year, for a total of 75 basis points. A basis point is one-hundredth of a percentage point, so 75 bps equals three quarters of a percentage point. After that, the bank expects the Fed to hold rates steady rather than pivot quickly to easing.

The implication of the forecast is not only delayed cuts, but also a longer period in which borrowing costs remain restrictive for households, businesses, and financial markets. When the path of future short-term rates stays higher for longer, it can influence expectations embedded in bond yields and the pricing of fixed-income instruments.

The forecast comes at a time when investors have been trying to handicap when the Fed might move from fighting inflation to prioritizing growth risks. Bank of America’s conclusion that cuts do not begin until 2028 effectively extends the timetable that markets often use as a benchmark for interest-rate sensitive sectors, from banking to housing and corporate credit.

Bank of America’s view also highlights how banks, even when they do not set policy, can materially shape market expectations through the publication of their rates outlook. Large dealers and asset managers frequently reference major bank forecasts when forming base cases for duration, hedging, and asset allocation, particularly around the timing of policy turning points.

While the report describes the bank’s updated trajectory, it does not, in the information available here, spell out the detailed rationale, such as the specific inflation or labor-market assumptions driving the delayed easing. It also does not identify whether Bank of America’s economists see any conditionality, for example whether a faster cooling in inflation would change the timing of the eventual cuts.

For Bank of America itself, the broader rates path matters across several lines of business. Higher-for-longer rates can support net interest income for banks, though it can also raise credit risks if the economy slows. The bank’s forecast therefore serves as a barometer for how its macro team views the balance of inflation pressure versus the cost of restraint.

What to watch next is whether the Fed’s own communication and incoming economic data start to align with Bank of America’s timing assumptions. If inflation readings and labor indicators continue to land in ways consistent with a prolonged pause, the market may increasingly treat “cuts later” as the base case; if not, the timetable for easing could move again before 2028.