Fed Cutting Rates In September Would Be A ‘Policy Mistake’, Warns Bank Of America: Report

Bank of America reportedly warned on Wednesday that if the Federal Reserve rushes to cut interest rates in September, it could be a “policy mistake,” based on the current macroeconomic data.

According to a report by CNBC, BofA economist Claudio Irigoyen said in a recent note that there is a supply-driven slowdown in the labor market, and inflation remains above the central bank’s 2% target. Irigoyen highlighted that a rate cut based on these factors is “unwarranted.”

He also stated that while Fed Chair Jerome Powell made a “dovish pivot” at his speech in August at Jackson Hole, easing the monetary policy stance would not be the correct move, according to the report. Irigoyen also observed that increasing political pressure to cut interest rates could result in a policy error.

Over the past few months, President Donald Trump and officials in his administration have repeatedly called for rate cuts. The President had stated that Powell is costing the U.S. $360 billion per year per percentage point, while saying interest rates are “at least 3 points too high.”

Meanwhile, U.S. equities gained in Wednesday’s midday trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up  0.29%, while the Invesco QQQ Trust (QQQ) gained 0.6%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.39% at the time of writing.

Also See: Fed’s Waller Says Central Bank ‘Needs To Start Cutting Rates This Month’, Warns Labor Market Could Turn Bad Fast: Report

For updates and corrections, email newsroom[at]stocktwits[dot]com.