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BofA maintains October Fed rate-hike forecast, warns core PCE could reach 3.4% by year-end (Oct 19)
What happened
Bank of America analysts led by Stephen Juneau stated in a report released Oct 19 that 'September inflation strengthens the case for an October hike' and that the case for the Fed to raise rates at its Oct 27-28 FOMC meeting 'remains strong.' The bank raised its month-over-month forecast for September core PCE by 10bp to 0.32% and warned year-over-year core PCE could reach 3.4% by year-end. BofA noted most FOMC members agreed to two rate hikes this year, questioned why the second wouldn't come in October, and left room for a third hike in December. Markets currently price only about a 20% chance of an October hike.
Why it matters & what’s next are part of Pro, along with the audio summary.
Start your free 14-day trialWho’s affected
- Rate-sensitive sectors broadly: homebuilders (already at 14-year-low sentiment), REITs, utilities; banks (net interest margins benefit, but credit-quality and growth concerns); growth/tech mega-caps facing higher discount rates; corporate borrowers generally as financing costs stay elevated.