The Federal Reserve’s campaign to hike interest rates with the goal of fighting inflation has successfully slowed US consumer spending, said Bank of America Corp. Chief Executive Officer Brian Moynihan.
(Bloomberg) — The Federal Reserve’s campaign to hike interest rates with the goal of fighting inflation has successfully slowed US consumer spending, said Bank of America Corp. Chief Executive Officer Brian Moynihan.
“Frankly, the Fed has won the battle of the American consumer — they are slowing down,” Moynihan said in a Bloomberg Television interview Tuesday. “And the question is what happens next.”
The CEO’s remarks come after the lender reported third-quarter results that beat analysts’ estimates for sales and trading and net interest income, a key source of revenue. In the interview, Moynihan said the company had seen customers’ spending on debit and credit cards jump 8% in the first half of the year compared to the same period a year earlier, but such growth slowed to as little as 4% for the months of September and October.
His remarks contrast with data released Tuesday showing US retail sales increased in September by more than forecast. Investors fear that such sustained strength in consumer demand will prompt the Fed’s policymakers to raise interest rates again before the end of the year.
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“Inflation is tough, especially on median-income households in terms of goods and services,” Moynihan said, pointing to more-expensive groceries and higher gas prices. “That is pressure you see in some of the consumer sentiment.”
Still, he said, consumer bank balances remain above pre-pandemic levels, though they’re starting to come down slowly.
Bank of America is still adding more primary checking accounts, especially with younger consumers, Moynihan said. At the same time, deposits are down from a year earlier, he said, with more-affluent customers who have excess savings shifting to products with higher yields or taking their funds elsewhere.
“The money went into the market,” Moynihan said. “It didn’t disappear, they just moved it to other things.”
In the wide-ranging interview, Moynihan also said that Bank of America’s investment-banking pipeline is “full,” even if dealmaking is not where it was before the Fed starting raising interest rates. “If it gets anywhere back there, you will see us go from the $1.1 billion level quickly up to $1.5 billion,” he said.
–With assistance from David Westin.
(Updates with additional commentary, retail sales in data in fourth and fifth paragraphs.)
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