The US economy will grind to a halt in the second half of 2023 and the following year won’t be much better, BofA says as it slashes its growth forecast

Bank of America analysts expect US economic growth to slow to nearly zero by the second half of 2023.
So while the risk of recession this year is low, BofA sees a 40% probability starting next year.
And 2024 isn’t looking much better as analysts see only “a modest rebound” by then. 

Bank of America has sounded the alarm on the US economy, predicting growth will stall next year and that the likelihood of a recession will surge.

In a note published on Friday — two days after the Federal Reserve hiked interest rates by 75 basis points — analysts said the Fed was too slow to aggressively tackle inflation, which is currently running at a 40-year high, and is abruptly scrambling to get on top of it.

Now BofA sees GDP growth slowing to near zero by the second half of 2023 due to the impact of tighter financial conditions. So while the risk of recession this year is low, BofA sees a 40% probability starting next year. And 2024 isn’t looking much better as analysts see only “a modest rebound” by then. 

“Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up,” according to the note.

Despite the Fed’s more hawkish stance, BofA doesn’t see inflation cooling enough to get down to the central bank’s 2% target. Instead, it will persist around 3%. While supply problems and demand for goods will ease, inflation expectations are anchoring at higher levels and wage pressures will be tough to reverse.

But the Fed is perhaps finally catching up to properly attack inflation, BofA said, and Wednesday’s rate hike was a strong step in the right direction.

Still, analysts aren’t confident the Fed will know what to do after it completes its tightening cycle. …read more

Source:: Businessinsider

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