US interest rate cut remains on the table, but destiny could change, says BofA

Bank of America released a note to clients and the market after the release of the jobs report payroll of the US stronger than expected. In the text, it states that the data is consistent with the flexibility in interest rates on the part of the Federal Reserve this year, even though it was exceptionally strong.

The bank’s expectation is that the cuts will begin in June, gradually. “The cuts are still on the table”say analysts, who consider that “destiny may be changing”.

“We consider the report supports Chair Powell’s view that the Fed may begin a cautious and gradual easing cycle later this year – provided available inflation data shows improvements.”say economists Michael Gapen, Stephen Juneau and strategists Mark Cabana and Alex Cohen.

However, the repercussion of the data could change perceptions about how far the easing cycle can go, according to experts.

“If supply-side effects are strong, then capacity expansion could lead markets to seek a higher terminal rate. Thus, the lack of overheating effects may cause the Fed to take off, but a strong labor market may limit how far the Fed can go.”BofA said.

With information from Investing Brasil.