Bank of America CEO sees a 'mild recession' in 2023 and is bracing for the worst

Bank of America CEO sees a ‘mild recession’ in 2023 and is bracing for the worst

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

“Our base case scenario is a mild recession,” he said during a call with investors. “But we also add to that a downside case, and what this results in is 95% of our reserve methodology is weighted toward a recessionary environment in 2023.”

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

THE US ECONOMY FACES A TURBULENT 2023 AS RECESSION FEARS GROW

Bank of America CEO Brian T. Moynihan speaks at the Boston College Chief Executives Club in Boston on Nov. 8, 2018. (Photo by Pat Greenhouse/The Boston Globe via Getty Images) (Getty/Getty Images)

Several Wall Street banks are forecasting a recession this year, though they remain unsure of its severity. That includes Goldman Sachs, Wells Fargo and Deutsche Bank.

Banks are bracing for a recession as persistently high inflation has prompted the Federal Reserve to raise interest rates at the fastest pace since the 1980s, threatening to cut consumer and business spending by increasing the costs of the loans. Policymakers have already approved seven out-of-the-box rate increases in 2022, raising the fed funds rate to a range of 4.25% to 4.5%, the highest level since 2007, and forecast a top rate of about of 5%.

Fed Chairman Jerome Powell has said the central bank has more work to do on its inflation-fighting drive, despite early signs that prices are starting to cool.

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

THE FED’S PREFERRED INFLATION INDICATOR COOLED IN NOVEMBER, BUT PRICES REMAINED FULLY 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, on June 15. June 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 substantially to a rate of 4.6% as rate hikes bring the US to the brink of crisis. recession. The Fed expects the unemployment rate to remain elevated in 2024 and 2025 as steeper rates continue to affect the economy.

Still, Powell has argued against the certainty of a recession, suggesting that lower inflation records could increase the chances of a soft landing, the sweet spot between curbing inflation without stalling growth.

“To the extent that we need to keep rates higher and keep them there longer and inflation goes higher and higher, I think that narrows the path,” Powell told reporters. “But lower inflation readings, if they persist, could certainly make it more likely over time. I don’t think anyone knows if we’re going to have a recession or not, and if we do, if it’s going to be deep.” one or not It cannot be known.”

BANK PROFITS BEATS EXPECTATIONS DESPITE ‘HEADWINDS’, JPMORGAN CEO ‘IS PREPARED FOR WHATEVER’

Heart Security Latest 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 prior-year quarter.

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Net income in the Consumer Banking unit grew 15% but fell 2% in Global Wealth and Investment Management.

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