Bank of America CEO Discusses Economic Slowdown and Fed Cutting Interest Rates – During a recent interview with Fox Business, Brian Moynihan, who serves as both the Chairman and CEO of Bank of America, discussed his expectations for a slowdown in the U.S. economy around the middle of next year.
He also mentioned that based on his bank’s research, the Federal Reserve is likely to begin reducing interest rates from the middle to the latter part of next year. Moynihan detailed that according to Bank of America’s research team: “The economy slows down in the middle of ’24 to about a half-a-percent annualized growth for the second and third quarter, and then works its way back out.”
“And the Fed will start cutting rates, they believe, in the middle of next year to the latter half of next year.” “So that’s the basic thing, what would be called a soft landing,” he added. The Bank of America chief then cautioned that there is a geopolitical risk, such as if the Fed tightening goes too far. Moynihan talked about the impact of interest rate increases on consumer and business choices.
The Federal Reserve has raised its main interest rate 11 times since March of the previous year, reaching its highest level in 22 years. Additionally, he emphasized the ongoing concern regarding inflation, pointing to the recent Labor Department report, which revealed a 0.4% increase in the consumer price index for everyday necessities such as gasoline, groceries, and rents in September.
The Bank of America CEO emphasized: “The higher interest rates affect the most rate-sensitive of activities, so homes, and you saw mortgage applications were low today just because a higher interest rate makes everybody step back and adjust. Car purchases, same thing.” Tesla CEO Elon Musk recently raised a similar concern regarding high interest rates affecting car purchases.
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Moynihan noted: “People are forgetting on the commercial side, there’s a huge impact of higher rates in terms of people’s willingness to borrow. And so lending conditions are tight, and that’s what the Fed wanted to achieve.” He concluded: “The point is that all the impacts of everything going on have led the consumer to slow down their activity. Whether it’ll be bounced around in retail sales, this is across all the things they do with their money.”