BofA’s Cabana Says It’s Premature to Call End to Fed’s Hiking Cycle

Bank of America's Ben Cabana stated that it is premature to conclude the Federal Reserve's rate-hiking cycle has ended, signaling that the bank does not yet see grounds for expecting a policy pivot. The core transmission channel is the rate-expectations path: when the market prices a longer period of restrictive policy, front-end Treasury yields and the terminal fed funds pricing hold up, which tightens financial conditions and tends to reduce demand for duration-sensitive assets. Large U.S. banks such as BAC are exposed through two opposing channels, as higher-for-longer rates support net interest margins while elevated funding costs and potential credit stress weigh on loan demand and asset quality expectations. Traders should watch the next core PCE inflation release and the subsequent FOMC communications for evidence on whether inflation persistence justifies extending the hiking path, since a softer print would strengthen the case for a pause and shift bank equity sensitivity accordingly.

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