Bank of America, the investment bank, warned in a research note issued yesterday, Monday, of the risks of the United States slipping into a state of stagflation in the coming period; indicating that the risks of stagflation are increasing over time.
Economists at the American bank cited negative economic growth policies, alongside the deportation of undocumented workers and cuts to government jobs, in addition to increasing threats of imposing higher tariffs, as contributing to this possibility.
This coincided with rising risks that the fiscal stimulus policies the U.S. government intends to adopt could be modest and delayed, amid rising levels of prices in the country above the target of 2%.
However, Bank of America does not expect the U.S. economy to experience a deep recession; growth may slow down, but it still remains at or above trend this year, and U.S. inflation may rise due to tariffs, but it may stay below the 3% level.
In the worst-case scenario, if the U.S. economy slips at a greater pace, or if inflation grows faster than necessary, the Trump administration will yield and limit tariffs, reduce spending, and impose restrictions on immigration.
