Bank of America’s Moynihan appeared on CNBC discussing various topics related to the economy. He remarked on Trump’s focus on laws and regulations within the industry.<\/p>\n
Bank of America’s economists forecast that the US economy will grow by roughly 1.5% this year. They do not predict a recession occurring during this period.<\/p>\n
The economists estimate that the Federal Reserve will not lower rates in the near future due to prolonged inflation. A rate cut by the Fed is only anticipated in 2026.<\/p>\n
Market analysts, however, currently predict a strong likelihood of rate cuts in the near term. There is a 91% chance of a rate cut in September to reduce rates to between 4.00% and 4.25%, and a 58% chance of another cut in October. Additionally, there are expectations of numerous rate cuts by the end of the year.<\/p>\n
2025-08-05T19:26:23.331Z<\/p>\n
We are looking at a major disconnect between market expectations and our economic outlook. The market is pricing in a rate cut for September with near certainty, but we see the US economy growing steadily at 1.5% this year with no recession in sight. This strength, combined with stubborn inflation, suggests the Federal Reserve has no reason to cut rates in 2025.<\/p>\n
The latest inflation report from July 2025 showed core inflation holding at 3.4%, which is still well above the Fed’s target. Additionally, the most recent jobs report showed the economy added a solid 210,000 jobs, supporting the case for the Fed to remain patient. Given this data, we believe the market is far too optimistic about the timing of any policy easing.<\/p>\n
Derivative traders should consider fading the market’s dovishness. This means selling interest rate futures contracts, like December 2025 SOFR futures, which are currently priced for lower rates. If the Fed holds steady as we anticipate, the value of these contracts will rise as the market reprices its expectations.<\/p>\n
Another strategy involves using options to position for rates staying higher for longer. We could buy put options on longer-duration Treasury bond ETFs, which would profit if bond prices fall as rate cut hopes diminish. This situation feels very similar to the market dynamic in 2023, where traders repeatedly and incorrectly priced in a Fed pivot that took much longer to arrive.<\/p>\n
The political environment, with its focus on easing rules and regulations, further supports a stable, non-recessionary economy. This reduces the urgency for the Fed to step in and stimulate growth. Consequently, the most logical stance is to bet against the imminent rate cuts that the market is so sure about.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Bank of America’s Moynihan discussed regulations, economic growth, inflation, and diverging forecasts on interest rate cuts.<\/p>\n","protected":false},"author":62,"featured_media":17025,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28284","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=28284"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28284\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17025"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=28284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=28284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=28284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}