(Reuters) -Bank of America Global Research on Friday pulled forward its forecast for the next Federal Reserve interest rate cut to October from December, citing signs of a softening labor market.
It remains the only major Wall Street brokerage forecasting just one more 25-basis-point rate cut from the Fed this year, while others such as Goldman Sachs and Morgan Stanley expect cuts at both of the Fed’s upcoming meetings.
BofA warned there is a risk the Fed could “over-ease.”
The U.S. government shutdown, which began on Wednesday, has disrupted the release of key economic data that the Fed relies on to evaluate whether conditions warrant a rate cut.
The release of the closely watched monthly jobs report, originally scheduled for Friday, has been delayed due to the government shutdown, leaving investors to interpret alternative indicators that point to a cooling labor market and reinforce expectations of a rate cut.
BofA says the soft trend in labor data is already strong enough to justify a rate cut, regardless of whether the NFP report is available or not before Fed’s October meeting.
Investors are pricing in a 98% probability of a 25-basis-point rate reduction in October and a 90% likelihood of another similar cut in December, according to CME Group’s FedWatch tool.
(Reporting by Joel Jose in Bengaluru; Editing by Krishna Chandts Eluri)
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