Amid growing concerns about the direction of the U.S. economy, Bank of America CEO Brian Moynihan called on the Federal Reserve to lower interest rates as soon as possible.
The Fed must strike a delicate balance between controlling inflation and avoiding a recession, Moynihan said in a recent interview.
Recent market turmoil, including record swings in the VIX volatility index, has raised investor concerns. While the labor market remains strong, mixed economic data and weakening consumer confidence have triggered alarms. Moynihan’s call for a rate cut comes as analysts and investors grapple with the Fed’s ability to achieve a soft landing, where inflation returns to its 2% target without a significant economic downturn.
“The economy is slowing down, so we have to be careful,” Moynihan warned, adding: “We have to be careful not to try to be so perfect that we end up in a recession.” Despite the cautious tone, Bank of America analysts are not predicting a recession this year, according to Moynihan.
The CEO also noted the potential impact of the Fed's decisions on consumer confidence, warning that if the central bank delays rate cuts, it could further erode consumer confidence.
All eyes are now on this week’s inflation data; the July consumer price index (CPI) report is expected to have a significant impact on the Fed’s next move. While the market expects a September rate cut, there is uncertainty over whether the Fed will cut by 25 basis points or a more aggressive 50 basis points.
Chris Larkin, director of trading and investment management at Morgan Stanley E-Trade, noted the critical timing of the inflation data. “Investors are looking for data that falls into a ‘sweet spot’ that is cool enough to not call into question the possibility of a September rate cut, but warm enough to calm the recession fears that have been plaguing markets lately,” Larkin said.
Analysts expect the CPI to increase by 0.2% on a monthly basis and 3.2% on an annual basis in July, above the Fed's 2% target.
*This is not investment advice.
