Bank of America Securities' Aditya Bhave reaffirms Fed rate hike call

Summary

BofA Securities' Aditya Bhave reaffirms his call for three Fed rate hikes this year after July CPI matched expectations. He argues policy is too loose because unemployment is down and inflation remains above target, and he sees long-end Treasury yields at risk if the Fed delays. The discussion covers hike timing, labor market strength, and core inflation persistence.

• July CPI rose 0.1% to a 3.4% annual rate, in line with estimates.
• Bhave sticks to his forecast for three Federal Reserve rate hikes this year.
• He sees the policy rate as 75 basis points too low relative to a year ago.
• He argues the July jobs report was not a disaster and labor demand is near equilibrium.
• He warns the long end of the Treasury market could unanchor if hikes are delayed and data re-accelerate.
• He estimates core PCE inflation would still be around 2.5% even if transitory factors fade.
• Potential hike timing is September, October, and December, with uncertainty and political pressure around midterms.