Bank of America CEO sees ‘mild recession’ in 2023 and is preparing for worse

Bank of America CEO Brian Moynihan said Friday that the bank is preparing for a possible recession this year, including the possibility of a sharper downturn as unemployment rises rapidly.

“Our bottom line scenario is a mild recession,” he said during a call with investors. “But we also add that bone of contention, resulting in 95% of our reserve methodology being weighted towards a recessionary environment in 2023.”

In the event of a more severe recession, Moynihan said the second largest bank in the US expects the unemployment rate to rise to 5.5% in 2023 and remain at 5% or higher through 2024.

ECONOMY IN SAFE 2023 as recession fears grow

Some Wall Street banks are predicting a downturn this year, although they remain uncertain about its severity. That includes Goldman Sachs, Wells Fargo and Deutsche Bank.

Banks are facing a recession as persistent and rising inflation has pressured the Federal Reserve to raise interest rates at the fastest pace since the 1980s, threatening to curb consumer and business spending through borrowing costs to push higher. Policymakers have already approved seven straight rate hikes in 2022, lifting the federal funds rate to a range of 4.25% to 4.5% — the highest level since 2007 — and a peak rate forecast of around 5%.

Fed Chairman Jerome Powell said the central bank has more work to do in its campaign to fight inflation, despite early signs that prices are starting to cool.

“The inflation data in October and November shows a welcome decline,” Powell told reporters in December at the end of the Fed’s policy-setting meeting. “But it will take a lot more evidence to give confidence that inflation is on a sustained downward path.”

Also Read :  Inflation, uncertainty fuel new gold rush at ancient Austrian Mint

The Fed’s favorite inflation gauge cooled in November, BUT prices remained high

Jerome Powell, Chairman of the Federal Reserve

US Federal Reserve Chairman Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions, at the Federal Reserve Building in Washington, DC, June 15, 2022. (Photo by OLIVIER DOULIERY/AFP via Getty Images / Getty Images)

Officials also indicated that economic growth will slow sharply in 2023 and unemployment will rise much higher to a rate of 4.6% as US rate hikes are brought to the brink retreat. The Fed expects the jobless rate to remain elevated in 2024 and 2025 as steeper rates continue to take their toll on the economy.

Still, Powell has pushed back against the certainty of a recession, suggesting that lower inflation prints could add to the danger of a soft landing – the sweet spot between containing inflation without dampening growth. .

Also Read :  Saudi Arabia just said they are now 'open' to the idea of trading in currencies besides the US dollar — does this spell doom for the greenback? 3 reasons not to worry

“To the extent that we need to keep rates higher and keep them there for longer and inflation moves up higher and higher, I think it narrows the runway,” Powell told reporters. “But lower inflation readings, if they continue, could in time make more possible. One or not. It is not known.”


Ticker Security last Change Change %
BAC BANK OF AMERICA CORP. 35.23 +0.78 +2.26%

Bank of America said fourth-quarter revenue rose 11% to $24.5 billion. Net income was flat, coming in at $7.1 billion compared to $7 billion in the year-ago quarter.


Net income in the Consumer Banking unit increased by 15% but decreased by 2% in Global Wealth and Investment Management.


Leave a Reply

Your email address will not be published.

Related Articles

Back to top button