• Bank of America economists have revised their outlook, now predicting no U.S. recession in 2025.
  • Resilient consumer spending and effective Fed policies are key drivers behind the updated forecast.
  • Inflation remains above target, but risks of overtightening now outweigh persistent inflation concerns.

A Shift in Economic Outlook

Bank of America CEO Brian Moynihan confirmed that the bank’s economists no longer anticipate a U.S. recession in 2025, marking a significant pivot from earlier projections. The revision stems from sustained economic growth, with consumer spending up 4.4% in Q1 2025, and the Federal Reserve’s success in curbing inflation without triggering widespread job losses or a sharp contraction in activity.

Moynihan emphasized that while inflation remains stubbornly above the Fed’s 2% target, the balance of risks has shifted. "The likelihood of overtightening now poses a greater threat than runaway inflation," he noted during a recent briefing. The bank expects U.S. GDP to grow around 1.5% this year, with gradual acceleration in subsequent years.

Consumer Resilience and Fed Policy

Despite some softening in spending growth compared to 2023, households continue to drive economic momentum. Transaction volumes have slowed but remain robust, supported by stable employment and wage growth. The Fed’s tightening cycle, which began in 2022, has managed to cool price pressures without derailing the labor market—a rare "soft landing" scenario that has buoyed market sentiment.

Alastair Borthwick, BofA’s CFO, pointed to regulatory stability and anticipated rate cuts starting in mid-2026 as factors underpinning corporate confidence. "We’re seeing cautious optimism," he said, though trade tensions and tariffs linger as minor headwinds.

Broader Implications

The updated forecast aligns with a growing consensus among major banks, including JPMorgan and Goldman Sachs, though some analysts remain wary of external shocks or abrupt shifts in consumer behavior. Meanwhile, debates around wealth inequality and regional disparities persist, even as the no-recession outlook provides reassurance to businesses and policymakers alike.

Correction: An earlier version of this article misstated the expected timing of Fed rate cuts. The bank anticipates cuts beginning in mid-2026, not 2025.