Investing.com -- The Federal Reserve is set for its first policy meeting next week, but BofA believes the meeting is likely to be nothingburger as the central bank is likely to keep rates on hold.
"We view the January Fed meeting as mostly a placeholder. The Fed will most likely stay on hold," BofA analysts said in a note.
The Federal Open Market Committee, or FOMC, is scheduled to meet on Jan. 28-29. The meeting is set to follow a hawkish rate cut in December, when the committee cut rates by 0.25% but also reined in its projections for future rate cuts to just two for 2025 from four previously.
Recent economic data, particularly the stabilization of the labor market around full employment, has validated bets on fewer rate cuts ahead, BofA said.
While the Fed isn’t expected to deliver a rate cut in January, the central bank may upgrade its view of the labor market in its monetary policy statement.
At the press conference that follows the rate decision, Fed Chair Powell is likely to lay the ground work to ensure there is maximum flexibility for the March policy decision, the analysts said.
With market participants pricing in "virtually no odds of a policy adjustment at this meeting," BofA says, "investors are more focused on Trump policy changes and the economic impact versus the Fed right now."
Beyond the clues on the path of interest, BofA flags guidance on the Fed’s balance sheet outlook as factor of interest, though concedes that expectations are "low given stable funding markets and little Fed focus on the issue."