BofA expects December Fed cut, two more in 2026

Dec 1 (Reuters) - BofA Global Research on Monday said it now expects the U.S. Federal Reserve to cut interest rates by 25 basis points at its December meeting, citing weak labor market conditions and recent comments from policymakers hinting at an early cut.

The Wall Street brokerage had previously expected borrowing costs to remain unchanged at the Fed's December meeting.It now sees two additional quarter-point cuts in 2026, in June and July, bringing the terminal rate to 3.00%-3.25%. "Our forecast of additional cuts next year is due to the change in leadership, not our read on the economy," analysts at BofA said in a note.White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next U.S. Federal Reserve chair, according to reports last week.BofA's shift follows dovish signals from key officials, including New York Fed President and FOMC Vice Chair John Williams, which have fueled bets on an earlier cut."By cutting rates next week, we think the Fed would increase the risk of pushing policy into accommodative territory, just as fiscal stimulus kicks in," BofA added.Traders are pricing in an 87.6% chance of a 25-basis-point interest rate cut in December, according to CME Group's FedWatch Tool.Most major global brokerages expect the Fed to cut rates by 25 basis points next week, with Morgan Stanley and Standard Chartered among the few expecting a hold.The Fed's upcoming policy meeting is scheduled for December 9 and 10.

(Reporting by Joel Jose in Bengaluru; Editing by Tasim Zahid)