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They expect U.S. Gross Domestic Product growth to slow to almost
zero by the second half of next year "as the lagged impact of
tighter financial conditions cools the economy," while they see
just a "modest" rebound in growth in 2024, according to a
research report Friday.
"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," Ethan Harris, global economist at BofAS wrote, adding
that the firm expects the Fed to hike interest rates to "above
4%."
They see the risk of a recession for this year as low.
The Fed on Wednesday approved its largest interest rate increase
in more than a quarter of a century to stem a surge in
inflation. The move raised the target federal funds rate by
three-quarters of a percentage point to a range of between 1.5%
and 1.75%.
Also, BofA Global economists lowered their global growth
projections, citing inflation, the war in Ukraine and COVID-related
lockdowns in China.
They now expect global economic growth of 3.2%. They said they
had forecast 4.3% global growth going into 2022.
They see further risks to 2022 growth if strict lockdowns
continue in China, and to 2023 growth if the U.S. economy slips
into recession.
The spike in energy prices amid the Russia-Ukraine war "has
already sent inflation soaring across the world, which in turn
has forced central banks into a more hawkish stance," the
economists wrote.
On Monday, Bank of America Corp's Chief Financial Officer
Alastair Borthwick said that there is no sign of recession in
the bank's loan portfolio, which remains on a healthy
trajectory.
(Reporting by Caroline Valetkevitch; Editing by David Gregorio)
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