These 3 factors could impact the US economy in the coming months

The United States economy is facing economic risks from three factors across the globe, according to a new Bank of America outlook. Here’s how they could affect your wallet. (istock)

There are three major factors that could significantly impact the United States’ economic growth in the quarter ahead, according to a forecast by Bank of America.

According to the bank’s head of CIO market strategy, Joseph Quinlan, the “volatile” market nature seen in the first quarter of 2022 will repeat itself in the second quarter of the year. I have noted the “Big Three” factors – or the acronym “ICE” – that will impact the “trajectory of asset prices” in the near-term. They are:

  1. Inflation in the US
  2. Coronavirus in China
  3. Energy shock and Europe

As inflation edges higher in the United States, the Fed will continue to raise interest rates in order to bring it back down. If you are interested in taking advantage of today’s current rates, consider refinancing your private student loans to reduce your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.

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1. Inflation in the US

Higher inflation pressures have yet to peak in the US and could remain high for an extended period of time, according to Quinlan.

“Inflation is expected to remain persistently higher for longer, meaning a more hawkish stance from the Fed in terms of raising the fed funds rate and reducing the Fed’s balance sheet,” he said. “The odds now favor a 50 bps hike in the fed funds rate in May.”

As inflation arises, the risk of a recession is rising with it, or slower-than-expected GDP growth. The Federal Reserve could respond by raising rates at a faster rate in order to bring inflation under control, according to Quinlan.

If you are interested in taking advantage of current interest rates before they rise further as the Fed works to combat inflation, consider refinancing your home mortgage to potentially lower your monthly payment. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

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2. Coronavirus in China

In late March, more than 70 major cities in China were either partially or fully shut down, according to Bank of America’s forecast. But despite this, the number of daily new COVID-19 cases there among the highest since the pandemic began.

Quinlan explained that reduced economic output from the world’s largest exporter could have a negative effect on today’s fragile global economy. It could also cause the Fed to shift its plans for interest rates in the coming months and create more financial stress for consumers.

“More shutdowns, not unexpectedly, means more downside risks to China’s growth outlook,” he said. “Service activities (travel, retail, etc.) will bear the brunt of the shutdowns and dampen Chinese personal consumption levels. Manufacturing remains a priority for a government still expecting the economy to expand 5.5% this year.”

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3. Energy shock and Europe

Quinlan classified the current state of the European economy as “weak,” primarily noting the ongoing conflict between Russia and Ukraine. He said that as a result, European energy prices are rising, adding that policy changes in America will be determined by global economic changes.

“Not for the first time, nor the last time, Europe has emerged as the weak link of the global economy,” Quinlin Quinlan said. “Proximity to the conflict with Ukraine/Russia, and Europe’s energy dependence on Russian oil and gas, have hobbled one of the key pillars of the world economy.

“The more Europe spirals downward, the greater the risks to the global earnings of US multinationals that count Europe as their top market in terms of non-US earnings,” he added.

The Federal Reserve will continue to monitor these factors as it determines its next steps for the federal funds rate. You can take advantage of low interest rates now by taking out a personal loan. Contact Credible to speak to a loan expert and get all of your questions answered.

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