BofA economists project two Fed rate cuts in 2026, one each at June and July meetings, though they deem such reductions unwarranted given current economic conditions. Aditya Bhave and Stephen Juneau caution that Kevin Warsh, Trump's Fed nominee, may have enough votes to push through cuts despite inflation concerns. The Federal Open Market Committee appears divided on policy direction as they await fresh inflation and GDP data.

Recent data shows a declining unemployment rate at 4.3% and rising inflation measures, making rate cuts questionable. The Fed currently holds rates at 3.5%-3.75% following reductions last year. CME FedWatch indicates a 47% probability of a June rate cut. With consumer demand firming and massive AI infrastructure spending underway, the case for cuts continues to weaken across key economic indicators.

Fed minutes from January revealed hawkish sentiment, with some participants open to rate hikes if inflation remains above the 2% target. BofA economists note the bar for cuts under current Fed Chair Jerome Powell at March and April meetings is now very high. The committee consensus suggests downside labor risks have diminished while upside inflation risks persist, leaving rate decisions increasingly data-dependent.