Rising Confidence: Wall Street Witnesses Economist U-Turn on US Recession Fears

The Bank of America is the latest to adjust its forecasts, and it maintains a catastrophic economic slump isn’t expected, despite great hesitation from experts and Wall Street. 

According to Bloomberg, BofA analysts wrote in a note on Wednesday that “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,” citing strong economic growth and the nearly record-low jobless rate.

By doing so, BofA is adding its voice to the growing chorus that claims recession worries were unwarranted. The economic slump that many were expecting hasn’t materialized despite all of the potential recessional harbingers, and as Neil Dutta stated in an article for Insider, “the economic doomsday clock has been reset. 

The bank also agreed with Goldman Sachs Chief Economist Jan Hatzius, who stated in a bank note from July that the likelihood of a recession within the next 12 months has decreased from its prior prediction of 25% to 20%.

Following a break in June, when rates were held stable, the Federal Open Market Committee declared last month that it was increasing interest rates by 25 basis points. 

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Fear to Hope

The rate increase, according to Federal Reserve Chair Jerome Powell, was required to keep moving toward the central bank’s 2% inflation target. However, he also noted that the committee’s outlook on the recession changed, and it no longer predicts a severe downturn for this year.

Inflation will gradually be brought back to the 2% target, Powell affirmed. We must be prepared to follow the facts, and given how far we’ve come, we can afford to be a bit patient as well as determined as we let this develop. 

Inflation has frequently proven higher than we and other analysts have predicted, but at some point that may change.

The committee has been anticipating the possibility of a recession at its meetings since the start of the year, so its revised outlook makes a soft landing even more likely to occur, in which the Fed can keep battling inflation while avoiding a recession. 

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Source: business insider