Bank of America CEO Warns Fed Against Aggressive Rate Cuts, Predicts ‘No Landing’ Scenario
In a recent interview with Bloomberg TV, Bank of America CEO Brian Moynihan expressed caution about the Federal Reserve’s approach to interest rate cuts. While acknowledging the need for rate reductions, Moynihan stressed the importance of a measured pace to avoid potentially destabilizing the economy.
During the interview, which took place in Australia where Bank of America is celebrating 60 years of operations, Moynihan highlighted the risks associated with overly aggressive rate cuts. He emphasized that the Fed’s decision to begin rate reductions was “late to the game,” and now it’s crucial to avoid moving too quickly.
Moynihan expressed concern about the potential for the Fed to “go too fast or too slow,” stating that this risk is greater now than it was six months ago. He believes that a balanced approach is essential to navigate the current economic landscape.
Looking ahead, Moynihan anticipates that the Fed will cut rates by an additional 50 basis points before the end of the year. He expects four more cuts of 25 basis points each, spread evenly throughout 2025. This scenario would bring the terminal rate to 3.25%.
With these anticipated rate cuts, Moynihan projects inflation will decline to 2.3% in 2025 and 2026. This rate environment, coupled with a robust labor market and low unemployment, has led Moynihan to predict a “no landing” scenario for the U.S. economy. In his view, the economy will continue to grow without experiencing a recession.
“With an unemployment rate at 4% and wage growth at 5%, it’s hard for an economist to convince the world there’s going to be a recession,” Moynihan remarked.
Bank of America shares closed down 0.3% to $42.17 on Wednesday, according to Benzinga Pro.
Moynihan’s comments provide valuable insight into the thinking of a major financial institution and highlight the ongoing debate surrounding monetary policy. His prediction of a ‘no landing’ scenario is noteworthy, as it contradicts some economic forecasts that anticipate a potential recession in the near future. The coming months will likely reveal whether the Fed can navigate a path of gradual rate cuts that effectively balances inflation and economic growth.
