BofA cancels call for recession in U.S. — the first big Wall Street bank to do so

financialpost.com:

Economists at Bank of America Corp. revoked their forecast for a recession in the United States, becoming the first large Wall Street bank to officially reverse its call amid growing optimism about the economic outlook.

The change comes just a week after U.S. Federal Reserve chairman Jerome Powell told reporters that the central bank’s own economists are no longer forecasting a recession.

“Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the U.S. economy,” BofA economists, led by Michael Gapen, wrote in a note to clients on Aug. 2.

“Growth in economic activity over the past three quarters has averaged 2.3 per cent, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually,” they wrote.

The resilience of the U.S. economy this year, despite the most aggressive Fed tightening cycle in decades, has forced many on Wall Street to repeatedly revise their forecasts for when the country will fall into recession. Now, with recent data showing persistent strength in hiring alongside moderating inflation, forecasters are beginning to rethink their recession calls altogether.

In addition to upward revisions to their forecasts for U.S. GDP growth in 2023 and 2024, the BofA economists altered their expectations for when and how the Fed cuts rates. The bank’s economists now see them beginning later — June 2024 — and proceeding at a slower pace.

While a few economists, including those at Morgan Stanley and Goldman Sachs Group Inc., have maintained throughout the past year that the U.S. would skirt a recession despite the rapid run-up in interest rates, most banks have taken the other side.

Sti