months are already priced in by the market, but the bank believes that the Fed may need to go further to achieve its inflation target. Bhave warned that this could lead to an outright recession, as consumer demand slows down and interest-sensitive non-consumer sectors such as housing suffer.
The bank’s warning comes as the Fed is widely expected to raise interest rates at its next meeting in December. The central bank has already raised rates three times this year, and many analysts believe that it will continue to do so in 2019.
Bank of America’s warning is based on the belief that the Fed will need to raise rates beyond what the market is currently expecting in order to bring inflation down to its target. The bank believes that this could lead to a slowdown in consumer demand, which would in turn lead to an outright recession.
The bank’s warning is particularly concerning for the housing market, which is already showing signs of weakness. Home sales have been declining for several months, and prices have started to soften in some areas. If interest rates continue to rise, it could make it even harder for potential homebuyers to afford a mortgage.
Despite these concerns, some analysts believe that the Fed will be able to navigate the current economic environment without causing a recession. They point to the fact that the economy is still growing at a healthy pace, and that unemployment is at its lowest level in decades.
However, Bank of America’s warning is a reminder that the Fed will need to tread carefully in the coming months. If it raises rates too quickly, it could cause a recession that would be felt across the entire economy.
