The US economy has a 40% chance of being in recession next year -BofA

Band Caroline Valetkevitch

NEW YORK, June 17 (Reuters)Economists at BofA Securities see a roughly 40% chance of a US recession next year as inflation remains consistently high.

They expect U.S. gross domestic product growth to slow to near zero by the second half of next year “as the lagged impact of tighter financial conditions chills the economy,” as ‘they see only a “modest” rebound in growth in 2024, according to a research report on Friday.

“Our worst fears around the Fed have been confirmed: they have fallen far behind the curve and are now playing a dangerous game of catch-up,” wrote Ethan Harris, global economist at BofAS, adding that the company expects the Fed raises interest rates to ‘above 4%’.

They see the risk of a recession for this year as low.

The Fed on Wednesday approved its biggest interest rate hike in more than a quarter century to stem a surge in inflation. The move raised the target federal funds rate by three-quarters of a percentage point to a range between 1.5% and 1.75%.

Additionally, economists at BofA Global lowered their global growth projections, citing inflation, war in Ukraine and COVID-related lockdowns in China.

They now expect global economic growth of 3.2%. They said they forecast global growth of 4.3% by 2022.

They see new risks to 2022 growth if strict containment measures continue in China, and to 2023 growth if the US economy goes into recession.

Soaring energy prices amid the Russian-Ukrainian war “has already pushed up inflation around the world, forcing central banks to take a more hawkish stance,” the economists wrote.

On Monday, Bank of America Corp. BAC.N Chief Financial Officer Alastair Borthwick said there were no signs of a recession in the bank’s loan portfolio, which remains on a healthy trajectory.

(Reporting by Caroline Valetkevitch; Editing by David Gregorio)

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