The American economy is slowing more rapidly than feared because of high inflation. A recession is likely later this year, Bank of America warned on Wednesday.
This marks the first time Bank of America is outright forecasting a downturn since the pandemic erupted in early 2020. A growing number of major banks are predicting a recession this year or next, although others argue the US economy can still experience a “soft landing.”
“Momentum in the domestic economy clearly appears to be slowing. The inflation tax is taking out the ability of households to spend on discretionary items at a fast clip,” Bank of America economist Michael Gapen told CNN in a phone interview.
The Bank of America recession call was made prior to Wednesday’s worse-than-feared inflation report. Gapen said the consumer price index, which spiked by the most since November 1981, gives him a “little more” confidence that a recession will happen because it shows how broad the inflation problem is.
“You can’t say this is just an energy story,” he said.