UNITED STATES, 03 October 2025 – Bank of America (BofA) Global Research has shifted its forecast for the Federal Reserve’s next interest rate cut to October from December, citing growing evidence of a softening U.S. labor market.
BofA remains the only major Wall Street firm projecting just one more 25-basis-point rate cut this year. In contrast, peers including Goldman Sachs and Morgan Stanley expect the Fed to cut rates at both of its upcoming meetings.
The research unit cautioned, however, that there is a risk the central bank could “over-ease.”
Data Disruption From Government Shutdown
The outlook comes against the backdrop of the ongoing U.S. government shutdown, which began on Wednesday and has delayed the release of key economic indicators. The Labor Department’s highly anticipated monthly jobs report, originally due Friday, was not released, forcing investors to rely on alternative signals pointing to a slowdown in the labor market.
According to BofA, the labor data trend is already weak enough to justify a rate cut, even if the official nonfarm payrolls (NFP) report is unavailable before the Fed’s October meeting.
Market Expectations
Markets have largely aligned with the revised outlook. Investors are now pricing in a 98% probability of a 25-basis-point rate cut in October and a 90% chance of an additional cut in December, based on the CME Group’s FedWatch tool.
The shift underscores heightened uncertainty in monetary policy amid political gridlock and disrupted economic reporting.
