Bank of America (BAC) CEO Brian Moynihan says the Federal Reserve has “victorious” against inflation, but pressures such as the strength of the U.S. consumer could keep interest rates higher for longer.
At a luncheon Wednesday at the Economic Club of New York, Moynihan said the Federal Reserve needs to curb inflation by slowing the pace of U.S. consumers’ purchases – and according to the bank’s own data, that strategy has worked.
“If you’re trying to create a soft landing … or something close to that, if you look at the current data, the bottom line is they’ve won,” Moynihan said of the Federal Reserve.
Bank of America shares were up 0.44% as of 3:00 p.m. ET on Wednesday. This year, the stock has underperformed its peers, falling 17.5% since the start of January.
Moynihan said BOA’s checking account database of 68 million customers shows that U.S. consumers are “slowing” and are currently on track to maintain spending at pre-pandemic levels, “in line with 2016, 2017, 2018.” “.
“They knew they were late. They caught up quickly. But now they have an equal and opposite problem. They have to be careful not to go too far,” he added.
Moynihan said Bank of America expected the Federal Reserve to raise interest rates “once again” in November, followed by three rate cuts in 2024 and four in 2025. The U.S., he added, “will not experience a recession.” , but “very slowly [GDP] Growth” for the second and third quarters of next year. He said quarterly GDP would rise back above 1% by the end of next year.
Bank of America Chairman and CEO Brian Moynihan speaks during “Mornings With Maria” at Fox Business Network Studios on July 27, 2023 in New York City. (John Lamparski/Getty Images)
Meanwhile, JPMorgan Chase (JPM) CEO Jamie Dimon wasn’t quite so cheerful. Earlier this week, in an interview with India Times, Dimon said he was cautious about the global economy. With concerns rising over the Ukraine war and food shortages, geopolitical pressures could also push U.S. interest rates to 7% – and he said he doesn’t think “the world is prepared.”
Asked if, like Dimon, he was cautious, Moynihan agreed that “geopolitical risks exist everywhere.” He added that a key issue that concerns him for the US is “fighting inflation… and not letting it be influenced too much by policy outcomes.”
The story goes on
Like Dimon, Moynihan joined other executives who spoke out in July against regulators’ proposed new capital requirements for banks. The proposed rules require major banks to set aside a total of 16% more capital to protect themselves against possible future losses.
Moynihan described the requirements as a matter of America’s economic competitiveness. If U.S. banks have to maintain more capital to lend to customers than competitors in other countries, the U.S. banking system will lose its edge.
“We’ll see how it works,” he said. “I think there is still a lot of work to be done.”
David Hollerith is a senior reporter for Yahoo Finance, covering banking.
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