On Tuesday, Bank of America CEO Brian Moynihan predicted that the United States economy will enter a mild recession later this year, mostly due to the resilience of the consumer sector.
For almost a year, analysts at Bank of America have warned that excruciatingly high inflation and the Federal Reserve’s relentless push to raise borrowing prices will lead to a recession.
Notwithstanding turbulence in the banking sector and evidence of a downturn in the economy, the central bank has authorized nine consecutive interest rate rises, the quickest pace of tightening since the 1980s, and has opened the door to a 10th increase at their May meeting.
According to Moynihan, Bank of America expects a decline of 0.5% to 1% in the gross domestic product (GDP; the nation’s broadest measure of goods and products generated) during the following three quarters before GDP begins to expand again.
He predicted the decline wouldn’t be as bad as it was because of low unemployment and decreasing wage pressures.
“The fact that unemployment is still 3.5% [indicates] full employment-plus,” he said, adding: “And then the wage growth is slowing and tipping over. So the signs of inflation are tipping down, and it’s still there but that translates into relatively good activity. We see a slight recession, and we’ll see what happens.”
The CEO’s forecast for a mild recession this year follows the March failure of Silicon Valley Bank and Signature Bank and comes just one week after papers from the Federal Reserve revealed that the central bank’s own staff economists are bracing for the recession.
According to the minutes from a March meeting of the Federal Reserve Board, “Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years”