Top Wall-Street brokerages revised their Fed rate cut forecasts, after a blow-out U.S. jobs report on Friday, with BofA Global Research forecasting a potential rate hike from the central bank.
"We think the cutting cycle is over ... Our base case has the Fed on an extended hold. But we think the risks for the next move are skewed toward a hike," BofA analysts said in a note.
Data on Friday showed, Nonfarm payrolls increased by 256,000 jobs last month, the most since March, and data for October and November was revised to show 8,000 fewer jobs added than previously reported.
Economists polled by Reuters had forecast payrolls advancing by 160,000 jobs, with estimates ranging from 120,000 to 200,000 positions added.
Market participants see a 76.31% probability that the Fed will cut rates by 25 basis points in June, according to CME FedWatch tool.
Both J.P.Morgan and Goldman Sachs pushed their Fed rate cut forecast to June, having earlier projected a cut in March.
"We think it would take a very bad set of jobs reports to get the Committee easing again by March," JPM analysts said.
Echoing a similar sentiment, Wells Fargo stated that a March rate cut 'looks increasingly unlikely', while brokerage ING said 'the risks are increasingly skewed towards an extended pause' from the Fed in a backdrop of sticky inflation.
Morgan Stanley added that the jobs report should reduce the probability of near-term Fed cuts, however added, "though our more favorable outlook on inflation keeps us thinking a March cut is still more likely than not."
