The Bank of America now predicts a 20% chance of a recession in the next 12 months, lower than its July forecast of 25%|Mike Mozart|CC BY 2.0

One of the major Wall Street banks, the Bank of America (BofA), joined the Federal Reserve in reversing its recession call for this year.

Last week, Fed Chair Jerome Powell said the central bank no longer forecasts a recession in 2023.

However, BofA does anticipate a mild recession in the U.S. by the end of 2024.

Why the turn?
BofA economist, Michael Gapen, attributed the revision to positive economic developments over the past three months—low unemployment and easing price pressures.

Less than a year ago, almost everyone was convinced that a recession was imminent.

What does BofA say?
The revised projections show the bank now predicts a 20% chance of recession in the next 12 months, lower than its July forecast of 25%.

The forecast also expects a GDP growth rate of 2% by the end of 2023, 0.7% for the year 2024, and 1.8% forecast for 2025.

Interest rate hikes
The Federal Open Market Committee raised interest rates by 25 basis points in July. It aims to reach the central bank’s 2% inflation target.

The committee’s new outlook suggests a soft landing, making it more achievable for the Fed to combat inflation without a severe economic downturn.

The prediction comes on the heels of rating agency Fitch’s decision to downgrade the country’s credit ratings.