BofA Joins Fed in Reversing Recession Call Amid Growing Optimism
(Bloomberg) -- Economists at Bank of America Corp revoked their forecast for a recession in the US, becoming the first large Wall Street bank to officially reverse its call amid growing optimism about the economic outlook.
The change comes just a week after Federal Reserve Chair Jerome Powell told reporters that the central bank's own economists are no longer forecasting a recession.
In the announcement of their new forecast, BofA economists, led by Michael Gapen, pointed to better economic outcomes over the past three months including low unemployment and easing price pressures as key to the change in their call.
“Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the US economy,” they wrote in a note to clients. “Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near alltime lows, and wage and price pressures are moving in the right direction, albeit gradually.”
They forecast US GDP growth of 2% for the quarter-ended December, 0.7% in 2024, and 1.8% in 2025. That's about 0.5 percentage points and 0.7 points higher in 2023 and 2024 than assumed previously, they wrote.
The resilience of the US economy this year, despite the most aggressive Fed tightening cycle in decades, has forced many on Wall Street to repeatedly revise their forecasts for when the country will fall into recession. Now, with recent data showing persistent strength in hiring alongside moderating inflation, forecasters are beginning to rethink their recession calls altogether.
Read More: US Recession Becomes Closer Call as Economists Rethink Forecasts
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©2023 Bloomberg L.P.
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