Bank of America Group warns of Fed policy mistake with early rate cut

Bank of America Group (NYSE:BAC) warned that the Federal Reserve risks making a policy mistake if it begins cutting interest rates next month, despite Chairman Jerome Powell's dovish tone at Jackson Hole.

"Barring further deterioration in the labor market, we believe the Fed would risk a policy mistake if it cut rates," the bank wrote.

"We see signs that economic activity has improved after a period of weakness in the first half of the year. If that holds true, the labor market is likely to rebound as well. Meanwhile, the underlying inflation picture—excluding tariffs—has not improved since the Fed began cutting rates last year."

Bank of America Group noted that while housing-related inflation has declined, other categories have remained flat or increased.