Bank of America Strategists Expect Fed to Lower Interest Rates

Bank of America strategists reportedly lowered their Treasury yield forecasts Monday (Aug. 11), saying recent developments have increased the likelihood of lower interest rates.

The strategists lowered their year-end forecast for two-year yield from the previous 3.75% to 3.5%, and cut their forecast for 10-year yields by the end of December from the previous 4.5% to 4.25%, Bloomberg reported Monday, citing a note from the strategists.

In changing these forecasts, the strategists pointed to soft labor market data and the appointment of Stephen Miran, an ally of President Donald Trump, as a Federal Reserve governor, saying that these are two factors that favor lower interest rates, according to the report.

“Recent U.S. data has meaningfully shifted market Fed pricing and our view on U.S. rates,” Mark Cabana, who led the strategists, said in Bank of America’s note, per the report. “Fed independence erosion risk could see higher inflation tolerance and more low-rate champions, which factor into our thinking.”

It was reported Thursday (Aug. 7) that Trump said he would nominate Miran, who is currently chairman of the Council of Economic Advisers, to serve out the last few months of the term of Fed Governor Adriana Kugler, who resigned a week earlier.

The nomination of Miran is subject to Senate approval, and the term expires Jan. 31, 2026, per the report.

According to that report, the appointment will aid Trump in his efforts to pressure Fed policymakers to lower interest rates.

Trump has called on Federal Reserve Chairman Jerome Powell to step down due to the Fed’s hesitancy to lower interest rates.

Treasury Secretary Scott Bessent, while declining to comment on that issue, said July 21 that the entire Federal Reserve needs to be examined. Bessent said the central bank needs a review because it engaged in “fearmongering over tariffs.”

“I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said. “If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why. Why has this happened?”