Bank of America economist Aditya Bhave is maintaining his forecast of three Federal Reserve rate hikes this year despite inflation data meeting Wall Street expectations. The Consumer Price Index rose 0.1% in July, keeping the annual rate at 3.4%. Bhave argues the FOMC needs to unwind 75 basis points of cuts made last year, as labor market weakness that justified those cuts never materialized. He expects the first hike in September rather than October, before the midterm elections. The 30-year Treasury yield stands near 5.25%, and traders now price a 42% chance of a September hike according to CME Group’s FedWatch tool.
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