the federal reserve waited too long to start fighting inflation and now runs the risk of dragging the economy into a recession according to bank of americas top economist on the heels of the central banks 75 basis point rate hike wednesday bofa global economist ethan harris said the fed is being forced into such aggressive moves by inflation now running at its hottest pace since late 1981  our worst fears around the fed have been confirmed they fell way behind the curve and are now playing a dangerous game of catch up harris said in a client note friday we look for gdp growth to slow to almost zero inflation to settle at around 3 and the fed to hike rates above 4 harris isnt predicting a recession yet but said the probability of one happening in 2023 has risen to 40 gross domestic product declined 15 in the first quarter and the atlanta fed expects the second quarter to be flat consecutive quarters of negative growth are considered a rule of thumb for a recession though the national bureau of economic research says it uses other factors as well before making an official declaration along with the rate hike fed officials indicated the benchmark funds rate will finish the year around 34 an upward revision of 15 percentage points from the march outlook policymakers still see gdp growing this year around 17 but that would mark a substantial fall from 2021s 57 pace harris said the scenario has played out in a similar fashion to a warning the bank issued more than a year ago in the spring of 2021 we argued that the biggest risk to the us economy was a boombust scenario we worried that the fed would take too long to put the brakes on he said we asked if the fiscal authorities are doing so much stimulus why does the fed need to add fuel to the fire with unusually late policy normalization over time the boombust scenario has become our baseline forecast in november harris said he wondered if the fed would ever get serious about fighting inflation separate releases friday affirmed the feds verbal commitment to battling escalating prices chairman jerome powell promised that the fed is acutely focused on inflation  while a fed report to congress on monetary policy said the approach would be unconditional while harris said the fed has put itself in a better position with the rate increases he thinks it will have to go further than the dot plot of individual members expectations indicates the plot points to a median expectation of a 38 funds rate by the end of 2023 but bofa is looking for something in excess of 4 five of 18 fed officials in this weeks dot plot indicated a rate above 4 the chart then indicates one or two rate cuts in 2024 to bring the funds rate back to 34 before it settles in at a longerrun rate of 25 where we disagree with both the fed and the markets is the idea that the fed will be cutting in 2024 harris wrote that is certainly possible if there is an outright recession however our baseline forecast assumes the fed will be like a deer in the headlights unsure over whether to react to very weak growth or still high inflation