According to the chief executive officer of Bank of America, recent discussions on whether or not the economy of the United States is technically in a recession are missing the point.
What really matters is that the current state of the economy is hurting people who are the most susceptible to its effects.
“There is such a word as a recession. It is simply not that important to know whether or not we are now experiencing a recession.
It’s how it must feel for the people who are going through this right now “In an interview with The Associated Press that took place at the Bank of America Tower in midtown Manhattan, Brian Moynihan discussed inflation, the current state of the economy, as well as the health of the U.S. consumer. He said this while discussing the topic of the health of the U.S. consumer.
The question of whether or not the economy of the United States is currently experiencing a downturn has been politicised in the run-up to the midterm elections in 2022.
Even if consumer confidence in the United States is on the decline and inflation is at a level that hasn’t been seen since the early 1980s, other metrics of the economy, such as the monthly jobs report, are still solid.
The Federal Reserve has been aggressively raising interest rates as a response to high consumer and wholesale prices.
The Fed’s hope is that by doing so, they will be able to tame inflation without causing too much damage to the economy.
Moynihan, who has served as the chief executive officer of BofA since 2010, refused to declare that the economy of the United States is currently experiencing a recession.
Instead, he stated that such a proclamation will need to come from “a bunch of people in Cambridge, Massachusetts.”
He was referring to the National Bureau of Economic Research, which is a nonpartisan organisation that determines when recessions begin and end.
Moynihan, on the other hand, listed the high cost of petrol and rent as two big concerns that have a negative influence on the lives of the average American as reasons to be concerned.
In June, the national average price of a gallon of gasoline skyrocketed to just over $5, but it has since fallen back below $4 for the first time in almost a month.
Moynihan seemed to be more concerned about the ever-increasing expense of rent, which does not typically change as much as petrol prices.
“The price of gasoline is beginning to fall, while rents have been increasing by 10, 12, and even 15 per cent. And it’s not uncommon for rent to consume forty per cent of these households’ total income “Moynihan remarked. The government’s Consumer Price Index showed a year-over-year increase of 8.5% in July, and rent is responsible for approximately one-third of that index’s total weight.
“We are worried about, for the U.S. broad-based consumer, is the increased rents as we go into the natural turn of rents (typically in the fall with school year),” he added. “We are worried about the increased rents because we are going into the natural turn of rents.”
The typical American consumer in the United States went into this period of high inflation and economic instability in a strong financial position.
The government of the United States has shelled out trillions of dollars to continue providing unemployment compensation and several other forms of pandemic assistance. As a direct consequence, people in the United States have been saving more money than usual and paying down their loans at a quicker rate than the historical average. The majority of these economic programmes were terminated in the previous year.
Moynihan stated that, notwithstanding what he has stated in prior interviews, he maintains the conviction that, on the whole, the American consumer is still in healthy condition and can weather the economic storm.
According to him, the majority of people in the United States who have a mortgage with a fixed rate have effectively locked in low borrowing rates, and even though credit card balances have been growing, they are still lower as a percentage of household income.
He stated that from the beginning of the year till the present time, they have not observed any change in the behaviour of their customers. He did remark, however, that there has been some slowing in the amount of money that Americans are saving, which is largely due to the rising cost of living.
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Moynihan stated that businesses are still increasing wages, which is helping Americans cope with the current economic climate.
Bank of America has taken the initiative to increase pay for its workforce of more than 200,000 people to mitigate the impact of inflation.
Employees making less than $100,000 were eligible for pay increases of up to 7%, depending on their length of service with the company. That does not take into account the customary procedure for merit increases at the organisation.
He stated that “many are finding that (the raises) are helping them deal with this.”
