The Bank of America (BOA) predicts a huge recession as the FED tightens its grasp on monetary policy, and the U.S economy stumbles under the pressure of increasing inflation.
Michael Hartnett, the chief investment strategist at BofA, issued a warning that the US economy can fall after what he calls “inflation shock” and “rates shock”, according to the reports from Reuters.
The Federal Reserve also hinted at the fact that it will probably begin cutting assets from its $9 trillion balance sheet at a double rate as it did in its earlier “quantitative tightening” exercise.
Moreover, a majority of commissioners demand that the central bank increases its key interest rate by 50 basis points under its aim to lower the inflation figures that have reached its decade high, as per the minutes from a March FOMC meeting.
Jeremy Powell emphasized that the economy of America is quite well-positioned and strong for carrying the burden of the stricter monetary policy, on Wednesday. Nonetheless, he pointed out that inflation probably takes more time to return to the price stability target than an earlier projection.
However, Michael even after the assurances anticipates a recession to unravel, forecasting an increase of 1.5% in the unemployment rate. This would be on top of an already inverted 10-year yield that has happened before every US recession, historically.
Commodities, Cryptocurrencies To Come Out Stronger
However, Michael debates that in regards to this economic disruption, commodities, cash, and crypto assets will likely emerge more strongly, outperforming bonds and stocks because of their inflation-advert nature.
In late February, he presents his thoughts on a bank where Global Crypto and Digital Asset Strategist, Alkesh Shah at the bank dismissed the probability of a crypto winter even though the U.S. Federal Reserve and microeconomic headwinds are presumably limiting the cryptocurrency growth. The level of adoption and growth in the development activity only shows constant strength by crypto assets, according to him.
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Source: https://www.thecoinrepublic.com/2022/04/12/bank-of-america-forecasts-a-great-recession-that-could-result-in-reaching-new-heights/