Bank of America Economists Expect a More Gradual Fed Rate Cut

Bank of America economists, in a report addressing client concerns, have stated that the Federal Reserve's actions historically tend to be more moderate than anticipated, thus avoiding hawkish surprises.

"The Fed usually prefers to sufficiently foreshadow any strong signals beforehand, in order to avoid unexpectedly tightening financial conditions. The Fed seems to be more inclined towards delivering surprises on the dovish side."

According to data from CME Group, the market currently predicts a 55% chance of a 50 basis point rate cut by the Fed, while a more moderate 25 basis point cut has a 45% probability.

"Bank of America believes the Fed is unlikely to implement an aggressive rate cut, which should support long-term bonds and steepen the yield curve."