Demand continues to heat up amid a strong jobs market, prompting BofA to expect the Fed to raise interest rates up to 6%. will enter a recession within the third quarter of this year.
BofA Global Research says the Federal Reserve (Fed) may raise interest rates to nearly 6% as consumer demand in the United States slows down. Strong and tight labor market It will force the central bank to fight inflation longer. This is higher than the 5.4% market estimate.
“Overall demand needs to soften significantly. To bring inflation back to the Fed’s target, while supply chain normalization and a slowdown in the labor market will only help, to a certain extent,” BofA said in the document. These processes are likely to take longer than we and the market expected.”
BofA’s more hawkish view came shortly after BofA raised its Fed rate hike forecast last week. At the time, the Fed was expected to raise interest rates another 0.25% in June after similar moves in March and May. This puts the Fed’s maximum interest rate in the range of 5.25-5.50%.
BofA also expects the US economy to will enter a recession by the third quarter of this year, although recently The National Association for Business Economics (NABE), which represents American businesses, said the likelihood of the economy entering a recession this year was lower than three months ago.