Bank of America expects the Federal Reserve to hold interest rates at its July meeting, warning that a surprise hike would break with decades of precedent. Analyst Mark Cabana said the base case is a hold with two hike dissents from Logan and Hammack, though a move higher cannot be ruled out. Markets have priced roughly 10 basis points of tightening, reflecting uncertainty and the risk of a hawkish surprise. BofA noted that the July hold call is closer than it had expected following soft June inflation, with higher oil prices raising the odds of a hike. Central to BofA's view is the argument that history says the Fed does not surprise hawkish with hikes, as federal funds futures data since 1994 show the Fed has never hiked with less than 60% priced in beforehand. A move this week would be unprecedented, pull forward 2026 hikes from about 45 basis points to roughly 60 basis points, and establish Warsh credibility on independence and inflation, BofA said. The bank remains paid on the 2-year U.S. Treasury, positioned in 2s10s flatteners and bullish on the dollar.
Bank of America CorpBofA's analyst publishes a research note on Fed rate expectations, which is a financial/valuation event for the bank itself, but the note's content does not directly affect BofA's business.