The signs of recovery of the U.S. economy were classified as "insufficient", according to Bank of America's President, Keith Banks. The specialist does not rule out a recession during 2023, aggravated by weaknesses found in the labor area.
In an interview with Fox Business, Keith Banks said: "Bank of America Global Research still forecasts a recession for 2023. While that's happening, they have to get out from under the cost quickly".
Keith Banks and the validity of his predictions
As these comments transpire, companies like Uber, Disney, Lyft, Royal, Spirit Airlines and Caribbean, among others, are readying their fourth-quarter earnings release last year and the Federal Reserve will weigh in on Tuesday after raising interest rates by a quarter point.
On the subject, the director of Bank of America considered that, as long as the Federal Reserve raises interest rates, costs will grow faster than revenues. This situation obviously hurts the bottom line.
"Businesses and consumers are still flush with cash," he said, noting that there is far more liquidity in the market than we are able to appreciate.
And in a frank allusion to the Fed, he said, "There is simply too much liquidity out there. They have to reduce that liquidity further. We think they will. Then as that starts to happen, as the Fed continues to tighten, it's hard not to imagine probably two hikes. That remains our forecast," he stressed.
Has only Bank of America predicted recession?
Without assuring the severity of the issue, several Wall Street banks are also forecasting a recession this 2023, including Wells Fargo, Goldman Sachs and Deutsche Bank.
High inflation and its persistence have led the Federal Reserve to raise interest rates at a pace only compared to the 1980s. This situation has motivated banks to remain alert and prepared to face the recession.
Seven direct rate increases in 2022 have already been approved by policymakers, raising the federal funds rate from the 4.25% range to 4.5%. Since 2007 this ranks as the highest, however predictions are that it may reach a maximum rate of 5%.
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