Bank of America Corp. CEO Brian Moynihan has cautioned the Federal Reserve against overly aggressive interest rate cuts, despite growing expectations for monetary easing, Bloomberg reports.
In an interview with Bloomberg TV on Wednesday, Moynihan expressed concern that the Fed may repeat its mistake of 2022 by moving too quickly.
“They were late to the game in lifting borrowing costs last year,” Moynihan said. “They have got to make sure they don’t go too hard now with cuts.”
Moynihan’s remarks come as investors have scaled back expectations for rapid rate reductions. Some Fed officials have also signaled a preference for a slower pace of cuts, citing signs of continued economic strength in the United States.
Despite the recent economic data, Moynihan believes the Fed will still cut rates further. He anticipates an additional 50 basis points of reductions by year-end, followed by four more cuts of 25 basis points in 2025. This would bring the terminal rate to 3.25%, according to his projections.
Moynihan expects inflation to gradually decline to 2.3% by 2025 and 2026 under this scenario. He believes that higher interest rates for an extended period would benefit banks by allowing them to maintain wider spreads on their loans.
“An end of cycle rate around 3% would be a whole different interest rate environment in the US and other markets than it’s been in the last 15 years or so,” he said. “That’s a better place for us to be frankly.”
Moynihan also noted that Bank of America’s net interest margin is expected to expand to as high as 2.3% over the longer term.
