BofA analysts said the US economy is “clearly overheating,”
The jobs data could push the Fed to continue with its aggressive rate hikes, even after it made its fourth consecutive 75-basis-point increase on Wednesday. The fed fund rate now stands at 3.75% to 4%.
“If the Fed wants to get labor cost inflation under control in a timely manner, we think it needs to engineer about a 2% rise in the unemployment rate,” the note said.
Europe currently faces significant downside risks that could change the outlook, such as the prospect of further natural gas supply cuts from Russia and uncertainty from upcoming sanctions on Russian oil.
“We can’t rule out additional shocks to the energy market, due to additional supply disruptions,” BofA said. “Europe is vulnerable to confidence shocks if the war in Ukraine escalates. And Europe is quite vulnerable to a colder-than-normal winter.”
