Bank of America has shifted its economic forecast, now suggesting that a recession is no longer on the horizon for the US economy.
This significant revision reflects growing confidence in the nation’s economic resilience, despite the ongoing challenges of inflation and high interest rates.
The bank’s new stance highlights the stability in consumer spending as a key factor in avoiding a downturn.
Consumer spending holds steady amid economic pressures
Bank of America’s research team, led by CEO Brian Moynihan, has re-evaluated the likelihood of a recession, concluding that the threat has considerably diminished.
This updated outlook follows a period of concern regarding inflation and potential economic slowdowns.
In a recent interview, Moynihan emphasized that consumer spending, although somewhat reduced, remains consistent with pre-pandemic levels.
Despite a slower pace, consumer spending continues to grow at approximately 3%, down from last year’s double-digit rates.
This moderation reflects the impact of higher interest rates, which have made consumers more cautious in their spending habits.
However, Bank of America’s analysis indicates that consumers are still financially stable, albeit gradually drawing down their savings as they navigate the current economic landscape.
Anticipated interest rate cuts signal economic normalization
Looking ahead, Bank of America predicts that the Federal Reserve will implement several interest rate cuts over the next two years as the economy stabilizes.
Moynihan outlined the bank’s expectation that the Fed will enact two rate cuts before the end of this year, with the first potentially occurring as early as next month, followed by another in December.
Additionally, four more rate reductions are anticipated in 2025 as the economy continues to adjust to the prevailing conditions.
These forecasts come after the Federal Reserve opted not to lower interest rates during its July meeting, a decision that initially unsettled the markets but was followed by a recovery. In anticipation of future rate cuts, mortgage rates have already begun to decline, reflecting the market’s preparation for further adjustments by the Fed.
‘Soft landing’
The US economy’s recent performance has been a source of concern, especially after a weaker-than-expected jobs report. However, the stability in consumer spending, as highlighted by Bank of America, suggests that the economy is finding its footing.
Moynihan’s remarks indicate that the economy is on track for a “soft landing,” where growth slows without tipping into a severe recession.
Bank of America’s revised outlook offers a more optimistic perspective on the future.
The bank’s expectation of multiple rate cuts suggests that inflationary pressures may be easing, paving the way for a gradual return to economic normalcy.
Nevertheless, Moynihan cautions that the adjustment period may take time, as businesses and consumers continue to adapt to the evolving economic environment.
As the US economy navigates these changes, the insights from Bank of America provide a hopeful outlook, with the potential for sustained stability in the face of previous uncertainties.
The post Bank of America revises outlook: Recession no longer expected as consumer spending stabilizes appeared first on Invezz
