The Federal Reserve will have to hold rates higher for longer as the US economy powers along, says Bank of America chief Brian Moynihan.
The US economy is “moving along,” he told the Summit, and this means the Federal Reserve will have to hold rates higher for longer to get inflation under control.“It creates a challenge for the world as they have to raise rates to very high levels,” he said.by at least another three quarters of a percentage point from its current range of 4.5 to 4.75 per cent.
“They’re going to have to hold it there for a long time because frankly the labour market is still very tight, despite what you hear about layoffs, and financial conditions are strong, so companies have access to capital, albeit at higher costs.” While consumers are spending, Mr Moynihan said there are some signs that higher interest rates are beginning to bite such as a slowing housing market and flat-lined car purchases. But he said a recession will be mild with modestly negative declines in economic activity.
He said Bank of America had committed $US1 trillion of funding over 10 years to finance the energy transition and had already deployed $US250 billion in two years.
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