BofA Exec Still Calls For 3 Fed Rate Hikes After July CPI

Bank of America (BofA) economist Aditya Bhave is holding firm on his forecast for three Federal Reserve rate hikes this year, even after July's inflation report matched Wall Street's expectations.

The Consumer Price Index (CPI) rose 0.1% in July, holding the annual rate at 3.4%. The reading came in exactly as economists forecast.

The Fed's Reversal Faces A Test

BofA reversed its stance in June, abandoning a hold forecast for its original three-hike call. The bank pointed to inflation that had grown steadily worse under new Fed Chair Kevin Warsh.

Bhave argues the Fed cut rates too aggressively last year, guarding against labor weakness that never fully materialized. He says the Federal Open Market Committee (FOMC) now needs to unwind 75 basis points of those cuts.

"We think they need to take back those 75 basis points of cuts. They were hedging against downside risks to labor that didn't really materialize."

Aditya Bhave, CNBC

Bhave Downplays The Jobs Scare

Bhave pushed back against the idea that July's shock jobs report signals real labor market trouble. He called the monthly figures noisy and pointed to seasonal patterns that typically weaken data this time of year.

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