Three major factors could have a significant impact on U.S. economic growth in the next quarter a forecast from Bank of America.
According to the bank’s head of CIO market strategy, Joseph Quinlan, the “volatile” nature of the market seen in the first quarter of 2022 will repeat itself in the second quarter of the year. He noted the “Big Three” factors – or the acronym “ICE” – that will impact the “asset price trajectory” in the near term. They are:
As inflation increases slightly in the United States, the Fed will continue to raise interest rates in order to bring them down. If you want to take advantage of today’s rates, consider refinancing your private student loans to lower your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
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1. Inflation in the United States
Higher inflationary pressures have yet to peak in the United States and could remain elevated for an extended period, according to Quinlan.
“Inflation is expected to stay persistently higher for longer, which means a more hawkish stance by the Fed in terms of raising the fed funds rate and shrinking the Fed’s balance sheet,” he said. . “The odds are now in favor of a 50 basis point hike in the fed funds rate in May.”
As inflation rises, the risk of a recession increases with it, or slower-than-expected GDP growth. The Federal Reserve could respond by raising rates at a faster pace to keep inflation under control, according to Quinlan.
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2. Coronavirus in China
At the end of March, more than 70 major cities in China were partially or completely closed down, according to Bank of America forecasts. But despite this, the number of new daily cases of COVID-19 there is among the highest since the start of the pandemic.
Quinlan explained that the reduction in economic output from the world’s largest exporter could have a negative effect on today’s fragile global economy. It could also cause the Fed to change its interest rate plans in the coming months and create more financial stress for consumers.
“More shutdowns, not unexpectedly, mean more downside risks to China’s growth outlook,” he said. “Service businesses (travel, retail, etc.) will feel the brunt of shutdowns and dampen Chinese personal consumption levels. Manufacturing remains a priority for a government that still expects 5.5% growth. % This year.”
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Quinlan called the current state of Europe’s economy “weak”, primarily noting the ongoing conflict between Russia and Ukraine. He said that as a result, energy prices in Europe were rising, adding that policy changes in America will be determined by global economic changes.
“It is neither the first nor the last time that Europe appears to be the weak link in the world economy,” he added. Quinlin Quinlan mentioned. “The proximity of the conflict with Ukraine/Russia and Europe’s energy dependence on Russian oil and gas has hampered one of the essential pillars of the world economy.
“The more Europe collapses, the greater the risks to the global profits of American multinationals who regard Europe as their first market in terms of non-American profits,” he added.
The Federal Reserve will continue to monitor these factors as it determines its next steps for the federal funds rate. You can now take advantage of low interest rates by taking out a personal loan. Contact Credible to speak with a loan expert and get all your questions answered.
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