Interest rate cuts are coming next year, Bank of America says

• Bank of America predicted the Fed will cut interest rates in the middle of 2024.
• It thinks the country can achieve a soft landing next year, as well.

Americans could finally see some financial relief next in 2024.

On Monday, Bank of America released its outlook for the upcoming year, and following a year of cooling inflation and no recession as the US continued to recover from the pandemic, the bank predicts Americans are due for interest rate cuts beginning in the middle of 2024.

While the bank expects Americans to soon feel the impact of the Federal Reserve's interest rate hikes over the past two years, which will "ultimately weaken growth and lead to higher unemployment rates," it forecasts a soft landing, in which the country can continue to fight inflation while avoiding a severe economic downturn.

"2023 defied almost everyone's expectations: recessions that never came, rate cuts that didn't materialize, bond markets that didn't bounce, except in short-lived, vicious spurts, and rising equities that pained most investors who remained cautiously underweight," Candace Browning, head of BofA Global Research, said in a statement.

"We expect 2024 to be the year when central banks can successfully orchestrate a soft landing, though recognize that downside risks may outnumber the upside ones," she said.

Michael Gapen, the head of the bank's US Economics team, expects the first Fed rate cut to come in June and a pace of cuts around 25 basis points per quarter through the end of the year. The bank did note, however, that there is "policy uncertainty" as the presidential elections approach, and it could have implications for interest rates depending on the candidates' economic approaches.

As Insider previously reported, the point at which experts predict interest rate cuts are coming in the US vary. UBS economists predicted earlier this month that the Fed will begin cutting rats in March, while Vanguard economists forecasted rate cuts in the second half of 2024.

When it comes to the Federal Reserve itself, it doesn't think interest rate cuts should be top of Americans' minds right now. Fed Chair Jerome Powell said during the November press conference following the central bank's announcement to continue its pause on rate hikes that he's "not talking about rate cuts."

"We're still very focused on the first question, which is, have we have we achieved a stance of monetary policy that's sufficiently restrictive to bring inflation down to 2% over time sustainably? That is the question we're focusing on," Powell said.

However, Powell did acknowledge the economy is moving in the right direction. The Consumer Price Index, which measures inflation, increased 3.2% year-over-year in October, marking a decrease from the 3.7% reading a month prior. Powell said he still does not forecast a recession this year, and "the risk of doing too much versus the risk of doing too little are getting more close to balance."