During an interview on Wednesday with Fox Business, Brian Moynihan, chairman and CEO of Bank of America, discussed the U.S. economy and the possibility of interest rate cuts by the Federal Reserve.
Moynihan explained that, according to the research team at Bank of America:
“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.”
“Therefore, this is the essence of a soft landing,” he continued. The Bank of America’s chief cautioned that there is a geopolitical risk, such as if the Federal Reserve tightens monetary policy excessively.
Moynihan discussed how rising interest rates have altered consumer and business decisions. Since March of last year, the Federal Reserve has raised its key interest rate eleven times, bringing it to its highest level in 22 years.
In addition, the executive emphasized that inflation remains a concern, citing a recent report from the Labor Department indicating a 0.4% increase in the consumer price index for everyday goods, such as gasoline, groceries, and rents, during September.
The chief executive officer of Bank of America emphasized: “The higher interest rates affect the most rate-sensitive activities, such as homes and mortgage applications, which were low today because a higher interest rate causes everyone to adjust. Car purchases are identical.”
Recently, Tesla CEO Elon Musk expressed a similar concern regarding the impact of high interest rates on automobile purchases.
Moynihan remarked, “On the commercial side, there is an enormous impact of higher interest rates on people’s willingness to borrow… Therefore, lending conditions are tight, which is what the Fed intended.
His conclusion:
“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.”