Brian Moynihan: The Bank’s Research Team ‘Does Not Have Any Recession Predicted Anymore’

BRENNAN: “I saw, in one of your Bank of America reports, that — and you just alluded to this, more price sensitivity, and that savings accounts are being diminished.”
MOYNIHAN: “Yeah.”
BRENNAN: “That would suggest people really are not bringing in enough, that they have to go into their — into their savings. Like, is this all just inflation that’s pressuring?”
MOYNIHAN: “If you look across different segments of earnings power, those answers are somewhat different.”
BRENNAN: “Yeah.”
MOYNIHAN: “But if you look at it overall, there’s been a lot of money moved to instruments that pay higher interest rates out of checking accounts, they cleaned up because it went from zero percent interest to five percent interest. And so if you remove that, basically the people who had an account with us in January 2020, before the pandemic, you look at them now, they’re still sitting with much more — even inflation adjusted, much more in their account. The problem is, it’s started drifting down, which indicates that they’re using that money now to maintain their lifestyle. That’s not that unusual in the summer months, frankly, because of travel and vacations and everything. And where the money is being spent by our consumers is on those type of experiences. But if you look within it, they’re still going to restaurants and they’re taking travel. But on the other hand, they’re spending a little bit less — they’re going to the food store the same number of times, but spending a little bit less, which means they’re basically finding bargains and things like that. And you’re seeing corporations cut price to respond to that. And so, it’s the way the economy works in those — it’s slowing down. And that’s where we have to be careful, because we’ve won the war on inflation. It’s come down. It’s not where people want it yet. But we’ve got to be careful that we don’t try to get so perfect that we actually put us in recession. But our team is a great team at Bank of America research, does not have any recession predicted anymore. Last year this time it was a recession. This year we talked about, now there’s no recession. And basically they say we go to 2 percent growth to 1.5 percent growth over the next six quarters and kind of bump along at that growth rate, plus or minus 2 percent.”
BRENNAN: “And they’re betting that in September the Federal Reserve does go ahead with an interest rate cut.”
MOYNIHAN: “Yeah, and I think that’s the — that’s — the market consensus is actually more cuts than our team is. Ours is two this year, September, December, four next year, and a couple next year. But I think one of the concepts you hear out there a lot, Margaret, is this concept of higher for longer. The reality is, our team, and most people think we’ll set them with 3, 3.5 percent Fed Funds Rate, which is much different than the last 15, 17 years people have lived it. So, people who came into the business world, you know, in 2007, 2008 have not seen this kind of interest rate environment. And so we’re getting back to normal. And that’s going to take a while for people to adjust to, both on the corporate side, commercial side, and on the consumer side.”