Bank of America CEO Brian Moynihan has advised the Federal Reserve to take a cautious approach in reducing interest rates, warning that a swift pace could be detrimental. Speaking in Sydney during his first visit to Australia, Moynihan said, “They were late to the game in raising rates in 2022, and now they need to be careful not to overdo it with cuts.”
Moynihan emphasized the heightened risk the Fed faces, stating, “The danger is that they either move too quickly or too slowly, and that risk is greater now than it was six months ago.” Investors have also tempered expectations for rapid rate cuts, with some Fed officials signaling a preference for a more gradual approach.
Despite signs of continued strength in the U.S. economy, Moynihan predicts another 50 basis points in rate reductions by year’s end, followed by four more 25-basis-point cuts throughout 2025. This would bring the terminal rate to 3.25%, with inflation expected to ease to 2.3% by 2025-2026.
Moynihan, one of the longest-serving U.S. bank CEOs, noted that robust consumer savings and strong wage growth—currently at 5% with unemployment at 4%—make it difficult to forecast a recession. However, he remains cautious about how the Fed’s monetary policy will evolve.
While Moynihan acknowledged that higher interest rates for a longer period would benefit lenders by expanding their net interest margins, he believes a 3% terminal rate would offer a healthier economic environment for both the U.S. and global markets.
Bank of America, he added, expects its net interest margin to grow over the long term, potentially reaching 2.3%, a promising figure compared to other lenders who are experiencing flat or declining margins.
