BofA sees the US Federal Reserve cutting rates four times in 22024, as it now predicts faster growth and lower inflation for the US economy.
Analysts at BofA said in a note to clients Monday that incoming data is signaling the US economy can enjoy both modest growth and disinflation simultaneously. "Despite weak readings on consumer confidence, the consumer remains inclined to keep its spending up," analysts at BofA wrote.
"We revise our outlook for the US economy and now expect real GDP growth of 1.2% in 2024 (4Q/4Q), 0.6pp higher than before. With stronger final sales, we have nudged up our outlook for employment, with private payrolls rising 88k per month on average in 2024 versus 56k previously," they explained.
The investment bank also revised its outlook for monetary policy in the direction of additional cuts. Previously, it saw the Fed easing by 75bp in 2024 with quarterly 25bp cuts beginning in June.
However, now it forecasts four 25bp cuts in March, June, September, and December, or 100bp of cuts for the year, bringing the target range for the federal funds rate to 4.25-4.50% in December 2024 and 3.25-3.50% in December 2025.
"Our projection is for fewer rate cuts than financial markets currently expect," said BofA. "We attribute the gap between our funds rate forecast and market pricing to a combination of market expectations of a faster slowdown in inflation and/or higher recession risk."