Bank of America CEO: U.S. Economy Stronger Than Expected, Fed Should Hold Rates

Bank of America CEO Brian Moynihan expressed optimism about the U.S. economy on Wednesday, stating that economic growth remains solid despite concerns about inflation and consumer confidence. While surveys suggest consumer sentiment is at a three-year low, Moynihan emphasized that actual spending data indicates continued strength in consumption.

Consumers Are Still Spending Despite Concerns

In an interview with CNBC’s Squawk Box, Moynihan highlighted a key paradox: while consumers express pessimism in surveys, they are continuing to spend at strong levels. However, he noted a shift in spending patterns—from goods to services.

“We’re in this classic moment where consumers say, ‘I’m getting more pessimistic,’ in surveys, but their daily spending patterns tell a different story. The economy is actually holding up better than people think,” Moynihan explained.

From a growth perspective, Bank of America projects U.S. GDP to expand at around 2% this year, down from recent trends closer to 3%. He attributed part of this slowdown to President Donald Trump’s tariffs, which he estimated could shave 0.4 percentage points off growth in the short term before the economy adapts.

Despite the dip, Moynihan remains bullish on economic resilience, stating that a 2% growth rate aligns with long-term economic trends following the financial crisis.

“We see the consumer continue to be solid, and that should bode well for the economy. While there are uncertainties, our focus is on what is actually happening—not just speculation. And right now, consumers are still spending strongly,” he added.

Federal Reserve Outlook: No Rush to Cut Interest Rates

Moynihan’s remarks come ahead of the Federal Reserve’s latest decision on interest rates. Market expectations indicate the Fed is unlikely to cut rates in the near term, and Bank of America’s forecast suggests the central bank will remain on hold through 2026.

“I think the Fed will be cautious about cutting rates, especially given the uncertainty surrounding tariffs,” Moynihan said. “They should hold onto their firepower rather than act prematurely to boost an economy that is already growing at 2%.”

He also stressed the importance of maintaining a “real interest rate” closer to 3%, contrasting with the near-zero rates seen following the 2008 financial crisis and during the COVID-19 pandemic.

“A stronger, more normalized rate environment is better for the long-term stability of the economy,” Moynihan concluded.

Key Takeaways

Consumer Spending Remains Strong – Despite declining confidence in surveys, actual spending remains high, with a shift from goods to services.
Economic Growth Slows But Stays on Track – GDP growth is expected to slow to 2%, partly due to the impact of Trump’s tariffs.
Federal Reserve Likely to Hold Rates Steady – Bank of America predicts no rate cuts until 2026, as the Fed carefully assesses inflation and economic trends.
Higher Interest Rates Are Sustainable – Moynihan argues that a real interest rate around 3% is preferable to past ultra-low rates.

As economic resilience continues, the question remains whether consumer spending can sustain momentum amid ongoing inflationary pressures and trade policy shifts. The coming months will provide greater clarity on how these factors shape the Fed’s decisions and broader economic trajectory.

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