BofA analysts told investors in a note Wednesday that it is easy to imagine a no-recession scenario, and the firm has altered its outlook for the US economy.
The analysts explained that recent incoming data has made the firm reassess its prior view that a mild recession in 2024 is the most likely outcome for the US economy.
"Growth in economic activity over the past three quarters has averaged 2.3%, the unemployment rate has remained near all-time lows, and wage and price pressures are moving in the right direction, albeit gradually," the analysts wrote.
In addition, they noted that cyclically sensitive sectors "have shown signs of stabilization."
"We revise our outlook for the US economy in favor of a soft landing, where growth falls below trend in 2024, but remains positive throughout our forecast horizon," they added. "We forecast US GDP growth of 2.0% (4Q/4Q) this year, 0.7% in 2024, and 1.8% in 2025. This is about 0.5pp and 0.7pp higher in 2023 and 2024 than we assumed previously."
BofA still expects inflation to decelerate and remain on a path to 2% but stated that with a stronger forecast for activity and labor markets, inflation will fall more gradually.
As a result, the analysts said if their outlook proves true, it would be good news for the Fed.
"We still expect one additional 25bp rate hike in September for a terminal target range of 5.50-5.75%, though it may slip to November. We now expect the first rate cut in June 2024," they said.