The Federal Reserve’s decision to cut interest rates remains up for debate. A team of economists at BofA Global Research argues that investors may be putting too much stock in a September rate-cut move, and instead believes the Fed could stay on hold until 2026.
On Monday, US stocks surged as investors shifted their focus from Friday’s disappointing July jobs report to the possibility of a rate cut. However, this interpretation might not be justified. According to BofA Global Research, a more nuanced view suggests that the job numbers were largely due to revisions in May and June, rather than an actual decline.
While the rally may provide temporary relief for stock-market bulls, it’s essential to consider the economists’ warning. By staying put on interest rates until 2026, the Fed could avoid making premature decisions based on short-term market fluctuations. This approach would prioritize a more sustainable economic outlook over a potential rate cut driven by short-term market sentiment.
Source: https://www.marketwatch.com/story/heres-the-case-against-a-september-rate-cut-and-why-the-fed-could-stay-on-hold-until-2026-f8a41d11