US consumer spending to see ‘recession’ in growth rather than decline, says Bank of America CEO | So Good News

US consumer spending is “slowing growth” but not slowing down, Bank of America CEO Brian Moynihan said Friday.

Interest rate hikes by the Federal Reserve are beginning to be felt in the housing and auto markets, and lenders will see their budgets eroded as homeowners pass on higher rates, he told CNBC’s “Squawk Box Europe.” But he stressed that consumer spending remains strong.

“If you raise prices and reduce the reduction of the economy in order to fight inflation, the expectation is that you have a decrease in consumer spending. It hasn’t happened yet. So it could happen, but it hasn’t happened yet,” said Moynihan.

“You’re seeing a reduction in the rate of growth, not a decline. Not negative growth.”

Bank of America expects the Fed to increase rates by 75 basis points and 50 basis points at its two remaining meetings this year, followed by two increases of 25 basis points next year. One basis point equals 0.01%.

That will take the money supply to about 5% and the Fed can “let it work,” Moynihan said.

The current rate of 3%-3.25% is the highest it has been since early 2008 and follows a three-point 75-point hike to combat inflation, which was running at 8.2% annually in September.

Economists, politicians and business leaders are divided on whether the US economy is on the up or down. US gross domestic product grew for the first time this year in the third quarter, it grew more than we expected by 2.6% per year.

JPMorgan boss Jamie Dimon told CNBC that he expects the economy to slow in the next six to nine months due to rising inflation and the unknown complications of Russia’s war in Ukraine.

But for now, consumers still have strong credit, unemployment is low, wage growth is strong and corporations are doing well with strong credit — even as growth and revenue are slowing, Moynihan said. However he acknowledged that there were risks from unexpected events with “low probability and high impact.”

“You don’t see the risks that indicate a change in the industry and the consumer. People are not laying off more people, they are not hiring more people,” he said.

Asked if the corporate credit market is reflecting any information, Moynihan said, “I wouldn’t confuse credit risk with rate risk.”

“Growth and profits may decrease, again because the economy returned very quickly and had a high growth rate that slows down a bit. If you see negative GDP figures, of course the company’s income may decrease,” he added.

“But on the other hand they are still making money, the margin is still holding … the main loan, the loan policy, the quality of the loan is very strong.”

Moynihan said Europe will see a recession in the early to middle part of next year “before it rebounds,” with the Ukraine conflict and energy crisis looming.

“But right now you don’t see the situation because the job is tight, the start-up job is tight, the amount of stimulus that’s been put in is still in markets that people don’t see as being very tough.”

He said: “The question of energy is very different from the US. The good news is that the US is a big economy, if we can get energy in Europe, so that people can heat their homes and factories, that would be great. And I know that all the companies are working, because I talk to them about this. “

Clarification: This article has been edited to clarify that Brian Moynihan was discussing the growth of US consumer spending.