"Inflation is stuck above target and risks are skewed to the upside. Economic activity is robust. We see little reason for additional easing."

The U.S. job market again defied an anticipated slowdown, with firms adding more than a quarter of a million jobs in the last full month of Joe Biden's presidency and leaving Federal Reserve policymakers to puzzle over the need for more interest rate cuts in a strong economy.

Before the strong December jobs report was released, the odds were already low for an interest rate cut in the next Federal Reserve decision on January 29.

The Fed is likely done cutting rates amid robust economic activity and can now eye a hike if core PCE or long-term inflation expectations rise, BofA says.

A hot December jobs report, combined with a murky inflation outlook for 2025, has some economists debating if the Federal Reserve may need to hike interest rates again.