Too Much Stimulus Is Key Cause for a Coming Recession, Says Bank of America CEO

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Excessive stimulus spending by governments during the pandemic is a key cause for a coming recession next year, according to a major bank CEO.

Too much stimulus money was printed during this time that the United States needs to โ€œadjust to that decision, and thatโ€™s why youโ€™re seeing the Fed tighten quick,โ€ Bank of Americaโ€™s CEO Brian Moynihan told โ€œCNN This Morningโ€ on Nov. 29.

The BofA CEO blamed uncertainty in the markets due to the potential U.S. freight rail strike, the war in Ukraine, and pandemic-related shutdowns in China for the increased chance of a global downturn.

Moynihan predicted that there would only be a โ€œmildโ€ recession in 2023, but that the American housing market will face almost two years of suffering before it sees a recovery.

Unlike some of his less bullish peers, Moynihanโ€™s prediction is less pessimistic compared to the massive downturn predicted by JP Morgan Chase CEO Jamie Dimon.

Dimon told a conference back in June that Americans should brace for an economic โ€œhurricane,โ€ while Goldman Sachs CEO David Solomon said in July there was a โ€œgood chanceโ€ that the United States was far from hitting peak inflation.

Mortgage Rates Lead List of Economic Concerns

Regarding the weak U.S. housing market, Moynihan said that โ€œas we see inflation slow down, and youโ€™re seeing the rate of growth of inflation slow down. Thereโ€™s still inflation, youโ€™ll see rates come back down โ€ฆ and youโ€™ll see the adjustments come through. And thatโ€™ll happen, thatโ€™ll take almost two yearsโ€”two years of slower activity.โ€

However, surging mortgage rates this year, caused by the Federal Reserveโ€™s aggressive interest rate hike policy, have made it very difficult for many younger buyers to purchase their first home, which could lead to tougher times for the housing market.

โ€œThis is the toughest thing. You have to slow down the economy. You have to slow down inflation. And the way you do that is raising interest rates,โ€ he said.

Byย Bryan Jung

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