Bank of America, a financial conglomerate, informs about an increased possibility of recession. According to estimates made by the institution, recession possibility is about 20%. In the end of the last week Head of European Central Bank Mario Draghi made a speech, which stimulated optimistic sentiment on the markets of Europe and Japan. However, time is required to form a positive trend. At the moment the situation on the stock markets is very controversial; during the first three week of the new year the markets lost about 7.8 trillion dollars.
Experts at BofA think that the Great Recession of 2008-2009 is not likely to repeat. If some turbulence happens on the markets, it won’t grow into a full-blown recession. However, even with the confidence that a recession risk is contained, bank specialists decreased the forecasts on the US gross domestic product by 0.4%. The analysts expect US economy to expand by 2.1% in 2016. Besides, BofA specialists are afraid that the US Fed doesn’t have any room for retreat as the regulator can only postpone the next rate hike. Analysts of the bank are not ready to speculate on the possibility of the 4th Quantitative Easing Program. The majority consensus suggests that the US GDP would stay unchanged in the 4th quarter of the last year. If expectations align with the official statistics, then a recession could be just around the corner. Three more months of stagnation or negative economic growth can easily lead to recession. The industrial sector is already in the red zone.
According to BofA, investors are trying to avoid risks and are shifting their money in the bond market. Last week saw huge inflows of $5.1 billion into Treasury. Definitely the US regulator needs to react to this situation sooner or later. But the next meeting will be held only in March. The consensus sees the single time rate hike by 0.25% until the end of the year. Earlier, economists predicted 2-3 hikes during 2016
