Anticipated Rate Reductions: Bank of America Predicts Two in 2021

The Federal Reserve has maintained its key interest rate at 4.25-4.5% for the third consecutive meeting, as economic data continues to be closely monitored. This marks a significant stretch since the Fed last cut rates on March 18-19, 2019.

Reports suggest that the Fed is expected to cut interest rates in September and December, although no official announcement has been made. The potential rate cuts would bring the rate down to 3%-3.25%, providing a much-needed boost to the economy.

Analysts at BofA predict that the first rate cut could occur in June, while Amundi estimates that the Fed could cut rates three times in 2025. However, these predictions are subject to change based on economic data and the direction of trade policy from the White House.

The U.S. economy added only 22,000 jobs in August, a significant drop from the 79,000 increase in July. This slowdown in job growth has strengthened arguments for two Fed rate cuts this year, according to Monica Defend, an Amundi strategist.

The U.S. unemployment rate rose to 4.3% in August, the highest level since October 2021. Economists had predicted an increase of 75,000 jobs for August, according to surveys by Trading Economics and MarketWatch.

The Fed members who support a rate cut in 2025 are Michelle W. Bowman, Christopher J. Waller, and Austan D. Goolsbee, with Jerome H. Powell being possibly in favor depending on data. Susan M. Collins and Alberto G. Musalem are rather not in favor, and others are unclear.

Jerome Powell, the Fed Chair, has made it clear that he would not rush to cut rates until there is more clarity on the direction of trade policy from the White House. He emphasized the importance of maintaining a strong economy and avoiding inflation.

The U.S. Labor Department released the August jobs report on September 5, providing valuable insights into the current state of the economy. The report will undoubtedly influence the Fed's decision regarding interest rates in the coming months.

As the Fed continues to weigh its options, the economy remains in a state of uncertainty. The Federal Reserve will need to carefully consider the data and the potential impacts of any rate changes on the economy as a whole. The next Fed meeting is scheduled for September 20-21, and investors and economists alike will be closely watching for any signs of a rate cut.