"If US Interest Rates Are Not Cut, Consumer Sentiment Will Take a Direct Hit... No Recession Expected This Year"

"If interest rate cuts do not start soon, it could dampen the enthusiasm of American consumers." Brian Moynihan, CEO of Bank of America (BoA), has called for a cut in the benchmark interest rate. Regarding former President Donald Trump, the Republican presidential candidate, who argued that the president should have a say in the Federal Reserve's (Fed) monetary policy decisions, Moynihan emphasized the 'political independence' of the Fed.

Brian Moynihan, Chief Executive Officer (CEO) of Bank of America (BoA)

On the 11th (local time), Moynihan appeared on CBS Face the Nation and stated that U.S. consumption is clearly slowing down. He said, "They (the Fed) have said there will be no more rate hikes, but if they do not start cutting rates soon, it could dampen consumer enthusiasm," adding, "Once consumer sentiment turns negative, it is difficult to reverse." He also noted, "From a commercial perspective, growth is slowing due to the high interest rate environment," and added, "There is concern about the future."

Amid recent market fluctuations due to recession concerns surrounding the U.S., Moynihan said, "Consumption is slowing," and explained, "Consumers still have money in their accounts, but it is gradually being depleted. Employment remains steady, and people are earning money, but if you look closely, spending has really slowed down." Reports recently released by BoA also confirm that while consumers still visit restaurants and grocery stores, the amount they spend has decreased. He emphasized, "Therefore, the Fed must be careful not to slow down too much."

He drew a line regarding the possibility of an economic recession this year. Moynihan said, "Our BoA research team has stated that there will be no recession this year," explaining that the base scenario is 2% growth. Regarding expectations that the Fed will begin cutting rates in September, he agreed, saying, "That is the market consensus." However, he added, "The market consensus is expecting more cuts than we are." BoA anticipates rate cuts in September and December this year, with the possibility of four additional cuts next year.

At the same time, Moynihan expressed a negative stance toward former President Trump’s recent press conference claim that he has better instincts than Fed officials or Chairman Jerome Powell and that the president should have a say in monetary policy. He said, "Looking at economies around the world, central banks that operate independently and freely tend to perform better than those that do not," emphasizing the need for political independence as "that is the American way, and it has been so far." He also added, "People are not prevented from advising Chairman Powell or others."