Bank of America has seen changes in one of the key indicators
Bank of America has updated its economic forecast, now signaling that the prospect of a recession in the US economy is diminishing. This revised outlook indicates growing confidence in the nation’s economic stability despite ongoing inflation and high interest rates, a report from Invezz noted.
According to the latest analysis from Bank of America’s research team, led by CEO Brian Moynihan, the probability of a recession has notably decreased. The bank attributed this positive shift primarily to the steady state of consumer spending, which has remained resilient despite economic pressures.
Moynihan noted that although consumer spending has slowed, it remains consistent with pre-pandemic levels. Currently growing at around 3%, down from last year’s double-digit figures, this moderation reflects the impact of elevated interest rates. Nonetheless, consumers continue to manage their finances well, albeit drawing down savings as they adjust to the current economic climate.
Impact of anticipated interest rate cuts
Looking forward, Bank of America anticipates several interest rate cuts by the Federal Reserve over the next two years, pointing to a potential normalization of the economy. Moynihan expects the Fed to implement two rate reductions before the end of this year, with the first possibly as soon as next month and another in December. Additionally, four more rate cuts are predicted for 2025 as the economy stabilizes.
This forecast follows the Federal Reserve’s decision to maintain interest rates during its July meeting, which initially unsettled markets but was followed by a market recovery. The anticipation of future rate cuts has already led to a decline in mortgage rates, reflecting market expectations of further adjustments.
Despite recent concerns following a weaker-than-expected jobs report, the stability in consumer spending suggests that the economy is on track for a “soft landing”—a scenario where growth slows without plunging into a severe recession. Bank of America’s revised outlook provides a more optimistic view of the future, suggesting that inflationary pressures may be easing and that economic conditions are gradually returning to normality.
However, Moynihan advises that the adjustment period may be gradual as businesses and consumers continue to adapt to evolving economic conditions.
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