Bank of America (BofA) expects the US economy to avoid a recession in 2025, and does not see any interest rate cuts by the Federal Reserve (Fed) this year despite heightened political and market uncertainty.
In a note on Monday, BofA analysts wrote: “These developments are consistent with our view that the US economy will avoid a recession and that the Fed is not expected to cut rates this year.”
While markets are hoping for a more dovish approach from the Fed, BofA said that strong consumer spending and still-high goods inflation point to continued economic resilience.
BofA highlighted that the latest inflation and retail sales data beat expectations. “Goods inflation is picking up and consumer spending remains strong,” the analysts said, adding that June’s retail sales control group rose 0.5% month-on-month, while the food services sector rose 0.6%.
The bank also warned against any politically motivated rate cuts. “Cutting rates to finance government deficits is, in our view, one of the worst reasons to do so,” it said, referring to President Trump’s criticism of Fed Chairman Jerome Powell.
The bank added that easing policy too early could “make things worse by causing the yield curve to steepen while at the same time weakening inflation expectations, weakening the value of the U.S. dollar and increasing credit risk.”
Looking ahead, BofA expects jobless claims to rise slightly for the week ending July 19, while housing data is expected to remain flat. Durable goods orders, due out on Friday, are expected to fall 11% month-on-month.
