Bank of America CEO predicts the US will enter a technical recession
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The Chief Executive Officer at the Bank of America, Brian Moynihan, has predicted that the US economy would potentially reach a technical recession from the third quarter of this year. Moynihan said that a US recession would not be severe, and the forecast interest rate by the bank could start dropping during the second quarter of 2024.
US could enter a technical recession
There have been concerns about how the US economy will perform in the coming years because the Federal Reserve decided to continue hiking interest rates. The Fed started raising rates early last year to cool down the economy after inflation levels in the US skyrocketed to 40-year highs.
The increase in borrowing costs has slowed down spending. While inflation shows signs of easing, there are concerns about the possibility of the US and the global economy entering a recession.
According to Moynihan, there was a likelihood that the US economy would enter a recession, but the recession could not be deep. The executive further noted that the interest rates could start dropping in Q2 2024, after which the economy could be headed to recovery with consumer spending increasing.
The Bank of America predicts that there will be three quarters of negative economic growth in the US because of a corporate slowdown. He added that the consumer sector would remain in good shape during this time.
Moynihan has also opined that the base projection for the company indicates that signs of a recession in the US will start to be seen from the third quarter of 2023. However, the economy will fully enter into a recession during the last quarter of 2023 and the first quarter of 2024.
Slight recession
He added that the bank predicted quarterly contractions ranging between 0.5% and 1%. “It’s a very slight recession in the scheme of things. I don’t think you’ll see a deep recession,” the executive added. He also said that the bank was holding the view of a recession being seen more on the corporate and commercial side, adding that a consumer-side slowdown was less likely.
The remarks came when Federal Reserve officials called for additional interest rates after the recently released inflation data showed that the levels were still significantly above target. Therefore, several hikes could be seen this year, despite the Fed Chair, Jerome Powell, saying that the deflationary process had already started.
“I think you’re going to see a slowdown which frankly, a lot of people are not going to see that much of. It will be more of a technical recession that it will be a deep prob in the US,” Moynihan added.
The discussion about a looming recession in the US comes as one of its competing economies, China, shows signs of a recovery. The Chinese government has eased COVID restrictions, which have opened up the economy and triggered gains across the Asian stock markets.
