The most aggressive Wall Street investment banks: Powell will not cut interest rates during his tenure.

Bank of America believes that there may not be another rate cut during Fed Chairman Powell's tenure. According to Wind Trading Desk, Bank of America has made one of the most aggressive predictions on Wall Street, suggesting that the FOMC will not cut rates again during Powell's term, which is in sharp contrast to the widely expected rate cut in December. The background of this bold prediction is that although the Fed cut rates in October, Powell himself immediately made cautious remarks, saying that another rate cut in December is "far from certain." At the same time, the ongoing government shutdown in the United States has led to delays in the release of key economic data, leaving the Fed and investors in a decision-making "fog." In this "data vacuum," market focus has been forced to turn to various alternative data. Bank of America's analysis shows that these data paint a complex but not pessimistic picture: the labor market is gradually cooling down, but there are no signs of sharp deterioration. This situation provides the Fed with a reason to pause rate cuts and forms the basis for Bank of America's hawkish prediction. Decision-making fog in the data vacuum Currently, the absence of official data caused by the U.S. government shutdown is the biggest uncertainty affecting Fed decision-making and market expectations. October CPI, PPI, and retail sales data, which were supposed to be released next week, will all be missing, leaving the Fed without direct inflation and consumption guidance before the December meeting. At the press conference in October, Chairman Powell used the metaphor of "driving in the fog requires slowing down" to vividly describe the current policy dilemma. He specifically mentioned that if there is no more official data released before the December meeting and alternative data remains robust, then pausing action would be "a strong reason." Bank of America believes that this means the threshold for starting a rate cut in December has been raised, with the need for data to "prove" its justification rather than "disprove" its necessity. Recent statements by Fed officials also echo this cautious sentiment. Bank of America's report concludes that officials' communication "leans slightly hawkish." Several officials, including Goolsbee, Hammack, Logan, and Schmid, have expressed concerns about inflation or reservations about further rate cuts, while relatively dovish officials like Daly and Cook have not explicitly committed to supporting a rate cut in December. Alternative data paints a full picture of the job market In the absence of official data, alternative data has become essential for understanding the pulse of the U.S. economy. Bank of America's analysis through its "Alternative Labor Data Heat Map" suggests that the U.S. labor market is in a state of "low churn," with idle market conditions gradually increasing but not collapsing. Weak hiring: Data shows that the job market is still challenging for job seekers. According to the report, the Chicago Fed's estimated hiring rate declined for the sixth consecutive month in October, and Challenger's data shows that the total number of job openings in September and October, the peak season, was significantly lower than the same period last year. Controlled layoffs: Weak hiring is offset by extremely low layoff rates. Although announcements of large-scale layoffs by companies like Amazon and UPS briefly caused market panic, Bank of America believes these may be "one-off events." A more critical indicator, initial jobless claims, has not reached concerning levels. Internal data from the bank shows that the number of households receiving unemployment benefits in October increased by about 10% year-on-year, with a slower pace compared to September, indicating that job loss is not accelerating. Marginal easing of wage pressure: Wage inflation, as a lagging indicator of labor supply and demand balance, also shows signs of cooling. ADP data shows that wage growth for job switchers has slowed significantly, while Indeed's wage-tracking index continues to decelerate. Bank of America believes that the unemployment rate will be a decisive factor in Fed decision-making. The bank's rule of thumb is that if the unemployment rate remains at 4.3% or below, or only rises very slowly, the Fed is unlikely to cut rates further. It is only when the unemployment rate reaches 4.5% in the coming months that the path may be paved for at least one more rate cut. Hawkish voices strengthen, Fed shifts to caution Bank of America's report systematically reviews the speeches of several Federal Reserve officials over the past week and concludes that the communication tone "leans slightly hawkish." This provides strong support for the bank's judgment to "pause rate cuts." Hammack from the Cleveland Fed bluntly expressed concern about high inflation, believing that it will not reach the 2% target until one or two years after 2026. Goolsbee from the Chicago Fed also expressed anxiety about inflation. Logan from the Dallas Fed and Schmid from the Kansas City Fed are both skeptical about another rate cut in December, with the latter believing that the labor market is "fundamentally balanced" and inflation "still high." It is worth noting that even San Francisco Fed President Daly, considered dovish, did not express as dovish sentiments as expected by the market. Although Directors Cook and Barr lean slightly dovish, both seemed not to commit to a rate cut in December. This collective shift to caution weakens market expectations for consecutive rate cuts by the Fed. Based on the analysis of the current economic and policy environment, Bank of America has updated its core economic forecasts, with a slightly more hawkish tone than the mainstream market views. Fed policy: It is expected that there will be no more rate cuts during Powell's tenure. The federal funds rate will remain in the range of 3.75-4.0% until the end of 2025, with the possibility of starting rate cuts in the second half of 2026 under a new chairman, with a total of 75 basis points in three cuts, eventually reaching a rate of 3.00-3.25%. Inflation: Due to input pressures from tariffs, inflation will remain high. The bank predicts that the core personal consumption expenditure (PCE) price index annual growth rate will hover around 3% from the fourth quarter of 2025 to the second quarter of 2026. Labor market: It is expected that the job market will slow down moderately, with the unemployment rate rising only about 0.1 percentage point each quarter, reaching 4.4% in the fourth quarter of 2025 and peaking at 4.5% in the first to third quarters of 2026. Economic growth: Maintains a "constructive" view of the U.S. economy. With reduced uncertainty and fiscal stimulus taking effect, economic growth is expected to continue towards trend levels, with a forecast of 1.8% for the full year of 2025. This article is reprinted from the "Wall Street News" app, author: Ye Zhen; GMTEight editor: Song Zhiying.