Bank of America considers US economy resilient to tariff effects

Analysts at Bank of America (BofA) consider the US economy resilient to tariff-driven pressures. Despite downgrading their forecast for the country’s GDP growth, the experts do not anticipate a recession, as they expect trade tension to de-escalate and the US fiscal policy to ease.

The Donald Trump's administration has recently eased back from high import levies. The US and China have agreed to temporarily reduce tariffs, and the American president has paused reciprocal duties.

According to the BofA analysts, these events sparked investor confidence that Trump might intervene to prevent US stocks from falling. As noted by the president, turmoil in the stock and bond markets was one of the factors behind postponement of the tariffs. 

However, BofA believes the Federal Reserve (Fed) cannot proceed with monetary easing to prop up markets. The strategists project the US central bank will not cut interest rates this year. The Fed cannot afford to slash borrowing costs preemptively while US inflation is above the target of 2% and the risks of rising unemployment linger.