Much like everyone else, BofA does expect the Fed to deliver another 25 bps rate cut this week. On the decision itself, the firm highlights possible dissents with Miran likely to stick with a 50 bps rate cut call and one potential hawkish dissent from either Goolsbee or Schmid. But in looking to December, it’s all about seeking guidance from Fed chair Powell’s press conference. BofA notes that:
“Powell is unlikely to offer much guidance beyond this meeting given the lack of official sector data and the
current labour-consumption conundrum. Powell will probably get asked about the dichotomy between the consumer and labor
data, a topic that Waller addressed in his latest speech and we delved into recently. We suspect Powell will
not take a strong view as even Waller seemed confounded and slightly less supportive of a December cut
than he was a few weeks prior. Markets’ interpretation of Powell’s comments on this issue will depend on
how willing he is to lean into consumer strength as an indication that the labor market will stabilise.”
BofA also says that the government shutdown is making things tough for the Fed, with policymakers having no official data to rely on and to work with. The firm argues that last week’s inflation data was “benign” at best and that might put off Powell from committing to another rate cut in December
