Bank of America CEO urges Fed not to go too hard on rates
He expects another 50 basis points of reductions before the end of the year and then four more cuts of 25 basis points spread evenly during 2025
BANK of America chief executive officer Brian Moynihan has urged Federal Reserve policymakers to be measured in the magnitude of interest rate reductions.
The Fed was “late to the game” in lifting borrowing costs in 2022 and now they’ve got to make sure they don’t go too far with cuts, Moynihan said in an interview with Bloomberg TV in Sydney on Wednesday (Oct 23) in his first trip to Australia, where the bank is marking 60 years of business.
Moynihan, 65, is one of the longest-serving chiefs among the top US banks, and has signalled his intent to stay on for years to come. He was promoted to CEO in 2010 as Wall Street emerged from the subprime mortgage crisis, and has shepherded the lender through the Covid-19 pandemic and the banking industry crisis that destroyed Credit Suisse and Silicon Valley Bank.
Moynihan’s visit to Australia included a meeting with King Charles, who is also in the country to discuss the Sustainable Markets Initiative, which the banker chairs.
Moynihan said during third-quarter earnings last week that the firm expects “no landing” for the US economy, referring to a situation in which growth stays strong, forcing central banks to remain hawkish on their inflation fight for longer.
“With an unemployment rate at 4 per cent and wage growth at 5 per cent, it’s hard for an economist to convince the world there’s going to be a recession,” he said on Wednesday.
He said he expects another 50 basis points of reductions before the end of the year from the Fed, and then four more cuts of 25 basis points spread evenly during 2025, bringing the terminal rate to 3.25 per cent. He expects inflation would drift down to 2.3 per cent into 2025 and 2026 under such a scenario.
The danger is that “they go too fast or too slow and that risk is higher now than it was six months ago,” he said.
US consumers are still cashed up from savings they accrued during the pandemic, the bank has said, though some households have recently showed signs of becoming more budget conscious. Investors are closely watching spending behaviour to help predict how the Fed will decide to cut interest rates. BLOOMBERG
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