As the Federal Reserve continues to cast doubt on the interest rate cuts many hoped it would carry out this year, Bank of America CEO Brian Moynihan is worried that people are too focused on the central bank.
“We’re Fed-watching way too much, right now,” Moynihan told CNBC on Tuesday, referring to the ongoing debates about when (or if) the Fed will lower interest rates — and if it does, how many times it will do so this year.
Bank of America reported its first-quarter earnings Tuesday, posting $7.2 billion in adjusted net income, or $0.83 per share. Although it beat expectations, its reported year-over-year profits, which included an added charge tied to the Federal Deposit Insurance Commission’s special assessment, dropped roughly 18%.
But Moynihan is wary of the Fed’s rate-hiking strategy, calling it a “huge constraint on economic growth” as the economy begins to slow. The central bank began its inflation-fighting campaign in March 2022, raising rates to between 5.25% and 5.5% in an attempt to wrangle inflation, which popped back up to 3.5% annually in March. The Fed has kept rates steady for the last few months as it weighs potential cuts.
But hotter-than-expected inflation readings have caused the already-cautious central bank, and chair Jerome Powell, to continue to dial back expectations for an imminent rate cut.
“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” Powell said Tuesday at a Q&A session in Washington, DC.
Banking CEOs across the board are preparing for just about anything to happen, with JPMorgan Chase & Co. top executive Jamie Dimon writing in his annual letter to shareholders earlier this month that the bank is prepared for interest rates of 8% or higher.
For Bank of America’s part, Moynihan echoed the sentiments of Dimon and other top brass at some of the largest U.S. banks: “At the end of the day our company will operate well in any environment,” he said.
Still, Moynihan noted, there are strong indicators that the economy is doing well — or at least better than the Fed would make it seem. The CEO pointed to solid consumer spending, strong business earnings, and low unemployment as examples.
Researchers at Bank of America “say it takes about four years to wind out of inflation, and so while the Fed has omnipotent power to make the decision, they don’t have the power to decide what the facts are,” Moynihan said.
Catch up on big bank earnings
JPMorgan, Citi, and Wells Fargo kicked off bank earnings. Here are the highlights
Bank of America, Morgan Stanley and Goldman Sachs reported earnings. Here are the highlights