Bank of America Corp (NYSE:BAC) has retracted its earlier forecast of an impending recession, citing a robust job market and vigorous consumer spending as the primary reasons.
The bank’s CEO Brian Moynihan confirmed this in an interview with Bloomberg on Thursday.
Moynihan expressed optimism about the economic climate, stating: “people are employed, they have money, they are spending money.” The economy seems to be reaching a stable state, he said.
Earlier this week, economists at Bank of America discarded their previous prediction of a recession in the United States.
“Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually,” BofA wrote in the report.
This makes BofA the first major Wall Street bank to officially retract such a forecast, reflecting growing optimism about the economic outlook.
Previously, the economics team at Bank of America led by Michael Gapen had predicted a mild recession in the first half of 2024. Now, they anticipate 75 basis points of rate cuts in 2024 and 100 basis points of cuts in 2025, significantly below market expectations.
During the interview, Moynihan also expressed concerns about the proposed new capital requirements for the largest US banks.
He warned they could risk pushing more banking activity outside well-regulated sectors.
“If you get the capital regulations — the banking system — too tight, you push things back outside the tent, and that’s a concern.”
Bank of America will adjust its model to fit the new rules and “make things work,” Moynihan said, but warned that the changes could make all banks less competitive.
The inflation rate remains high as Americans have cut down on spending and expenses.
The Federal Reserve is expected to meet in September and has stated that it will take a look at the data from the jobs report.
Fed Chairman Jerome Powell remain comitted to the 2% interest goal as questions are expected to be raised when the fed meets in September.
“Any slowdown in the job market has generally been anticipated by cyclical industries underperforming when it comes to hiring trends. So we’re looking at stuff like the construction sector, manufacturing, trade,” said Alfonso Peccatiello, founder of The Macro Pass.
The economy is expected to be one of the hot topics in the presidential general election as voters will decide on the fate of the current administration in the next year.
Produced in association with Benzinga