Brian Moynihan, CEO of Bank of America, recently warned in an interview with CBS that American consumers could become discouraged if the Federal Reserve, headed by Jerome Powell, does not cut interest rates in the near future.
The Fed has kept its policy rate on hold between 5.25% and 5.50% for the past year, with a cut possible in September if inflation continues to decline.
Moynihan said that if consumers perceive that rates are not coming down soon, they could become pessimistic, which would negatively affect consumption and the U.S. economy.
For the bank executive, the problem is that once consumer sentiment turns negative, it is difficult to reverse it: “They have told people that they probably won’t raise rates, but if they don’t start lowering them relatively soon, they could discourage the American consumer,” he warned.
In the interview, Moynihan outlined his position on the independence of the Federal Reserve, saying that economies that allow their central banks to operate freely tend to perform better compared to those where that independence is not respected.
“If you look around the world’s economies and see where central banks are independent and operate freely, they tend to fare better than those that don’t,” the Bank of America chief said.
The comment is important in the current electoral context, as former President Donald Trump has suggested that presidents should influence the decisions of the Fed.
The US economy is currently in a tense situation, where monetary policy and consumer confidence define stability and economic growth, especially relevant in view of a new presidential election.
The FED’s previous moves were:
· 0.0%, July 31 (2024) to 5.25%
· 0.0%, June 12 to 5.25%
· 0.0%, May 1 to 5.25%
· 0.0%, March 20 to 5.25%
· 0.0%, January 31, 2024 to 5.25%
· 0.0%, December 13 (2023) to 5.25%
· 0.0%, November 1 to 5.25%
· 0.0%, September 20 to 5.25%
· 0.25%, July 27, to 5.25%
· 0.0%, June 14, to 5.00%
The U.S. Bureau of Labor Statistics has reported that year-over-year inflation has seen significant increases throughout the year:
· July (2024): 2.9%
· June: 3.0%
· May: 3.3%
· April: 3.4%
· March: 3.5%
· February: 3.2%
· January: 3.1%
· December (2023): 3.4%
· November: 3.1%
· October: 3.2%
· September: 3.7%
· August: 3.7%
· July 3.2%
Continue reading:
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· The FED keeps interest rates unchanged in June 2024
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