Analysts at Bank of America have warned, this week, that high inflation should be a concern to all, as it may pose a fair threat to the economic recovery efforts that began two years ago.
According to Bank of America chief investment strategist Michael Hartnett, market behaviors like “inflation shock” are getting worse while “rate shock” is only beginning and “recession shock” is around the corner.
The warning, in his most recent note to clients, came as a bit of bracing for a new government that was released on Tuesday. Hartnett’s note indicated that consumer prices shot up by nearly 9 percent in March. That is the fastest consumer price rate growth since December of 1981! Contributing to this was record year-over-year price spikes on goods from a diverse cross-section of consumer departments from men’s apparel to salad dressing and new vehicles to baby food.
Specifically commenting that inflation is “out of control” Hartnett advises that “Inflation causes recessions”. And while the last recession came as a result of the pandemic, the Federal Reserve quashed economic expense in an attempt to fight the rise of this very metric.
Obviously, that does not appear to be working quite as planned.
Accordingly, Markets are now bracing for the Fed to quickly raise their interest rates. As a matter of fact, the consensus expectation is that this series of interest rate raises will be the fastest pace in several decades. Of course, this is a delicate situation as too much pressure too fast could accomplish the opposite of its goal and further sink the economy instead of buoy it.
Now, it is important to keep in mind that with this note, Bank of America is not specifically calling for a US recession. Still the bank appears to be raising concerns that a slowdown is definite and a recession will certainly follow.