With rising inflation causing a nationwide headache, one of America’s leading finance executives has made some optimistic claims.
Fed Winning the Battle?
According to Bank of America CEO and chairman Brian Moynihan, a battle is being waged between rising inflation and the Federal Reserve – and the Fed is winning.
BOA CEO Makes Bold Claims
While Wall Street watches the Fed’s every move with bated breath to see if they enact the rate cuts that were expected this year, Moynihan believes commentators and economists may be overzealous.
War on Inflation
“The reality is that they [the Fed] have got to win the war on inflation, and they are winning, and it’s coming down,” Moynihan told reporters. “They have got it on the right trend.”
Uncertain Comments from the Fed
His positive stance comes in the wake of uncertain comments from Federal Reserve Chair Jerome Powell made on Tuesday.’
“Longer Than Expected”
During an event in Washington, while discussing the Canadian economy, Powell told the crowd that it was going to take the Fed “longer than expected” to drive down inflation.
2% Goal
The central bank’s goal was to reduce inflation to just 2% this year, a number that Powell had previously claimed they would meet “at some point” in 2024. But on Tuesday, he appeared to change tack.
Letting the Data Guide Them
“Given the strength of the labor market and progress on inflation so far, it’s appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us,” he told the crowd.
PCE Price Index
He pointed to the Personal Consumption Expenditures Price Index (PCE), the Fed’s gauge for inflation, and remarked that the index was unlikely to see change through March.
February and March
The PCE was set at 2.8% for February, significantly higher than the 2% target. March numbers have not yet been released.
Greater Confidence Needed
“We’ve said at the FOMC that we’ll need greater confidence that inflation is moving sustainably toward 2% before it would be appropriate to ease policy,” he said of potential rate cuts.
“Likely to Take Longer”
“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell continued.
Longer Window for Inflation and Rate Cuts
If a longer window is required to reduce inflation to the 2% target, it will also take longer to cut rates.
Raised Since March 2022
The Fed has been raising interest rates to an aggressive degree since March 2022 in a bid to reduce inflation. Rates are now sitting at a 23-year record high.
Will It Happen At All?
Experts and analysts who previously predicted that rates would be cut from the 5.25% to 5.5% bracket this year are left wondering if the Fed will cut rates at all in 2024.
All Making Sense
But Moynihan has remained unshaken by Powell’s statements, saying that a later date made sense.
“The past would tell you it would take a longer period of time, especially when they started late,” he said.
Too Much Reliance on the Fed
He also went so far as to say that people were relying too much on the Fed, and Powell himself, to make financial decisions.
“Fed-Watching”
In an appearance on CNBC’s Closing Bell this week, he accused analysts of “Fed watching way too much right now” and explained he looked at the market directly to track the progress of the economy.
They Can’t Change the Facts
“While the Fed has omnipotent power to make the decision, they don’t have the power to decide what the facts are,” he added, noting that “it takes about four years to wind out of inflation” based on Bank of America research.
Optimistic About the Future
All in all, Moynihan doesn’t seem too worried, expressing optimistic sentiments about the future economy, similar to statements made by JP Morgan Chase CEO Jamie Dimon earlier this month.
“We Will Operate Well in Any Environment”
“At the end of the day our company will operate well in any environment,” Moynihan continued, pointing to low unemployment and high consumer spending as just some signs that the economy is going strong.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
