Bank of America CEO, Brian Moynihan, sat down with an interview with CNBC recently. During the interview he was asked about the current status of rate expectations for the near future. He announced that since the start of the year Bank of America members have spent much more throughout the first 40 days of the new year than in 2024. For comparison, retail spending is up 6% than it was at the same time last year. Moynihan says that this increase is realistically caused by inflation. He claims that there is not more being bought, but instead everything is just more expensive.
During the month of January the Fed decided to keep the borrowing rate unchanged at a range of 4.25%-4.5%. The Bureau of Labor Statistics also came out and reported hotter-than-expected growth in the consumer price index; in line with the results that Bank of America are finding at the beginning of the year. Due to this "hotter-than-expected growth" in the CPI the markets are forced to recalibrate all rate expectations. Recently back in September the Fed began to reduce rates for the first time since the pandemic in 2020, but the central bank is currently limited with how much it can reduce due to stubborn inflation.
Moynihan concluded by stating that due to the rates being restrictive, there has not been enough progress made with inflation to cut the rates. The Bank of America analysts project the same with no rate reductions along with no increases all due to the elevated inflation that we are all experiencing.
https://www.cnbc.com/2025/02/12/bank-of-america-ceo-brian-moynihan-inflation-federal-reserve-rates.html
2 comments:
The Fed keeping the rates unchanged indicates that the economy is not out of the woods yet and that inflation continues to be a problem. The Bank of America members spending more just indicates that prices a higher and not that they are actually buying more. Due to inflation, the consumer’s money doesn’t stretch as far as it should.
You raise a good point about Bank of America’s take on the current state of inflation and interest rates. It’s clear that, despite more spending, people aren't buying more but they’re just paying higher prices, which is a direct result of inflation. The fact that the Fed has kept rates steady suggests they’re still grappling with inflation and can’t afford to make drastic cuts just yet.
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