The angst on Wall Street over how much the Federal Reserve will cut interest rates this year was laid bare in Bank of America Corp.’s latest results.
Stephen Biggar, director of financial services research at Argus Research, joins BNN Bloomberg to discuss investing strategy for U.S. bank earnings.
Management indicated — as part of its forecast for net interest income — it expects the Fed to lower rates by a quarter point at policy meetings in September, November and December. Financial forecasts often embed assumptions about what the Fed will do, and it’s common to rely on what’s priced into derivative contracts. During July, those market-implied odds have shifted in favor of two Fed rate cuts this year starting in September — and a roughly 50 per cent chance of a third one by year-end.
The Bank of America split stands out because Gapen’s forecast is among the least optimistic by an economist at a major U.S. bank. Forecasts for a single quarter-point cut this year, coming as late as December, were more common until recently. Gapen wasn’t immediately available to comment.
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