Bank of America Rules Out U.S. Recession, Expects No Fed Rate Cuts in 2025

“The latest data reinforce our view that the U.S. economy will avoid a recession and the Fed will not cut rates this year,” analysts said.

Quick overview

  • Bank of America reports that the U.S. economy is resilient, driven by strong consumer spending and persistent inflation.
  • The bank does not anticipate any interest rate cuts from the Federal Reserve for the remainder of the year.
  • BofA projects that the U.S. will avoid a recession in 2025, despite political and financial uncertainties.
  • The report warns against monetary policy decisions influenced by political pressures, emphasizing the risks of premature rate cuts.

In a recent report, Bank of America (BofA) stated that the U.S. economy remains resilient, supported by strong consumer spending and persistent inflation in goods.

Bank of America

As a result, the bank does not expect the Federal Reserve to cut interest rates for the remainder of the year. It also warned of the dangers of monetary policy decisions influenced by the political climate.

BofA now projects that the U.S. will avoid a recession in 2025, and that the Fed will keep interest rates steady throughout the year, despite ongoing political and financial uncertainty linked to the presidential election cycle.

“The latest data reinforce our view that the U.S. economy will avoid a recession and the Fed will not cut rates this year,” analysts said in a note published Monday.

Persistent Inflation and Strong Spending

The bank highlighted that consumer spending remains robust and that goods-related inflation continues to be sticky. According to the report, the retail control group—a key input for GDP calculations—rose 0.5% month-on-month in June, while the food services category increased 0.6%.

SPX

Political Pressure and Inflation Risks

BofA also cautioned against monetary decisions influenced by political considerations. “Cutting rates to help fund the government deficit is probably one of the worst reasons to do so,” the analysts wrote, in reference to recent criticism of Fed Chair Jerome Powell by President Donald Trump.

“This kind of political noise unnecessarily raises the bar for rate cuts,” the report stated. Premature easing, it warned, could unanchor inflation expectations, weaken the dollar, increase credit risk, and steepen the yield curve.

Outlook for the Coming Weeks

Looking ahead, BofA expects a modest increase in jobless claims for the week ending July 19 and anticipates stable housing market data. However, it forecasts a sharp 11% monthly decline in durable goods orders, with the report set to be released this Friday.

ABOUT THE AUTHOR See More
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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