© Reuters. FILE PHOTO: Flags fly in front of 85 Broad St., Goldman Sachs headquarters in New York City’s financial district, January 20, 2010. REUTERS / Brendan McDermid
By Caroline Valetkevich
NEW YORK (Reuters) – BofA Securities economists see an approximately 40% chance of a recession in the United States next year, with inflation remaining high.
They expect US gross domestic product growth to slow to almost zero by the second half of next year, “as the delayed impact of tighter financial conditions cools the economy”, while they see only a “modest” recovery in 2024. , according to a study report on Friday.
“Our worst fears about the Fed have been confirmed: they are far behind the curve and are now playing a dangerous game of catching up,” wrote Ethan Harris, a global economist at BofAS, adding that the company expects the Fed to raise interest rates to “over 4%.”
They believe the risk of recession this year is low.
The Fed on Wednesday approved its biggest rate hike in more than a quarter of a century to stem inflation. The move raised the federal interest rate target by three-quarters of a percentage point to between 1.5% and 1.75%.
In addition, BofA Global economists lowered their forecasts for global growth, citing inflation, the war in Ukraine and the COVID-related blockade in China.
They now expect global economic growth of 3.2%. They said they forecast 4.3% global growth in 2022.
They see additional risks for growth in 2022 if strict blockades continue in China, and for growth in 2023 if the US economy falls into recession.
The rise in energy prices amid the war between Russia and Ukraine “has already sent inflation around the world, which in turn has forced central banks to take a more hawkish position,” economists write.
On Monday, the chief financial officer of Bank of America Corp. (NYSE 🙂 Alistair Bortwick said there were no signs of a recession in the bank’s loan portfolio, which remains on a solid trajectory.