US economy has 40% chance of entering recession in 2023, says BofA

US economy has 40% chance of entering recession in 2023, says BofA

Bank of America Securities economists see about a 40% chance of a US recession next year, with inflation remaining persistently high.

They expect U.S. gross domestic product (GDP) growth to slow to near zero by the second half of next year “as the lagged impact of tighter financial conditions cools the economy”, while they see only a “modest” recovery. ” in growth in 2024, according to a research report this Friday (17).

“Our worst fears around the Fed have been confirmed: they have fallen far behind the curve and are now playing a dangerous game of compensation,” wrote Ethan Harris, global economist at BofAS, adding that the company expects the Fed to raise rates to ” above 4%”.

They see the risk of a recession this year as low.

The Fed on Wednesday approved its biggest rate hike in more than a quarter of a century to stem the rise in inflation. The measure raised its base rate by 0.75 percentage point, to a range between 1.5% and 1.75%.

BofA economists also lowered their forecasts for global economic growth to 3.2%. They said they predicted global growth of 4.3% for the year at the start of 2022.

They see more risks to growth in 2022 if strict Covid-19 lockdowns continue in China. There will also be risk to global activity in 2023 if the US economy slips into recession.

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