Bank of America Global Research predicted in its latest report that the Federal Reserve will cut rates by 25 basis points at its December meeting, citing weak U.S. labor market conditions and recent indications from policymakers suggesting an earlier rate cut.

It is worth noting that Bank of America had previously forecast that the Federal Reserve would keep interest rates unchanged at the December policy meeting.

Bank of America now expects the Federal Reserve to cut rates by another 25 basis points each in June and July 2026, ultimately bringing the terminal rate down to 3.00%–3.25%.

Bank of America analysts stated in a report: "Our forecast for further rate cuts in 2026 is based on (the Fed's) leadership changes, rather than our interpretation of the economy."

Earlier reports indicated that Kevin Hassett, Director of the White House National Economic Council, has become the leading candidate for the next Federal Reserve Chair. Hassett's monetary policy stance leans "dovish," with a core focus on cutting rates as soon as possible to avoid the risk of a U.S. economic recession. His interest rate policy inclination aligns closely with that of U.S. President Donald Trump, who has consistently called for significant rate cuts.

Bank of America adjusted its forecast against the backdrop that core officials, including John Williams, President of the New York Fed and Vice Chair of the Federal Open Market Committee (FOMC), have recently sent dovish signals, further boosting market bets on an earlier Fed rate cut.

Bank of America added: "We believe that if the Fed cuts rates next week, it will increase the risk of monetary policy entering an easing cycle, just as fiscal stimulus measures are beginning to take effect."

Currently, most major global investment banks, including Goldman Sachs and JPMorgan Chase, expect the Fed to cut rates by 25 basis points next week; only a few, including Morgan Stanley and Standard Chartered, expect the Fed to keep rates unchanged.

According to the schedule, the Federal Reserve will hold its next policy meeting on December 9 and 10. According to CME's "FedWatch Tool," as of the time of writing, the probability of a 25-basis-point rate cut in December is 89.2%, while the probability of keeping rates unchanged is 10.8%. Additionally, the probability of a cumulative 25-basis-point rate cut by next January is 66.6%, the probability of keeping rates unchanged is 7.7%, and the probability of a cumulative 50-basis-point rate cut is 25.7%.