Bank of America CEO Brian Moynihan said on Wednesday that he expects the US economy to achieve a soft landing and avoid a recession even as consumer spending and commercial lending slow down.
He said in an interview, "Our research team is the best in the industry and they believe that the economy has turned to a soft landing. They expect the economy to slow down in the middle of next year
At the same time, he said that the bank's consumer spending in October had slowed to 4% to 4.5%, about half of what it had earlier this year, and commercial customers were not borrowing as much. However, he does not believe that there will be a "large-scale" consumer default (repayment) problem.
For several months, Moynihan has been using healthy consumer finances and spending as a sign that the US economy may avoid a recession. His views often contrast sharply with the pessimistic views of industry peers.
According to his statement, Bank of America economists predict that the US economy will grow by 2.7% this year and 0.7% in 2024. In the so-called soft landing scenario, economic growth slows down but remains positive.
This is contrary to the mainstream view in the market. Jeffrey Gundlach, CEO of Double Line Capital and the "New Bond King", had previously warned that the Federal Reserve would cut interest rates as the economy further deteriorated and plunged into recession next year.
Wharton School of Business Professor Jeremy Siegel stated on Monday that given the recent release of weak economic data suggesting an imminent recession and inflation having been largely controlled, the Federal Reserve needs to maintain flexibility and consider interest rate cuts earlier than market expectations.
He pointed out that a reliable indicator of recession is flickering - the unemployment rate has jumped 50 basis points from a cyclical low. Last Friday's non farm report showed that the US unemployment rate has risen to 3.9% from the cyclical low of 3.4% in April.
On the other hand, Bank of America economists also expect the Federal Reserve to raise interest rates again in December, reaching the final range of 5.50% to 5.75%.
Moynihan also said that the Federal Reserve may raise interest rates again, although this is not certain. He expects the Federal Reserve to cut interest rates in the second half of next year.
It will take until the end of 2025 for the inflation rate to fall to a low of 2%, "he added.