After a huge year for growth, the U.S. economy is about to slam into a wall.
Likewise, Bank of America knocked down its first-quarter number to 1% from 4% and cut its full-year forecast to 3.6% from 4%, with risks to that forecast seemingly tilting to the downside.
Bank of America's head of global economics research Ethan Harris cited four reasons for the downbeat outlook: omicron, the retreat in inventory build, less fiscal support, and a tighter Fed as well. "We now expect a fiscal package about half the size of the Build Back Better Act, with less front-loaded fiscal stimulus. We think it will boost 2022 growth by just 15-20 [basis points], compared to our earlier estimate of 50bp," Harris wrote. "Risks of a negative growth [first] quarter are significant, in our view."Bank of America has another wrinkle in its forecast: a call for seven 25-basis-point rate hikes this year.
Zandi said the Fed needs to be careful it doesn't go too far in its fight against inflation, which is running at its"They run the risk of getting ahead of themselves and overdoing it. They have pivoted very hard here," he said. "Market expectations are for five increases. Six is now entering into the debate and discussions. That feels like that could be a rate hike or two too far, given the growing headwinds in the economy.
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