Financial institution of America’s Moynihan says the Fed can pull again on coverage assist

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Brian Moynihan, CEO of Bank of America, encouraged the Federal Reserve to ease its ultra-easy monetary policy and said Monday that the urgency for the pandemic-related response is easing.

A day before the central bank’s monetary policy meeting began in June, the head of the world’s second largest US bank by assets told CNBC that inflation-related issues were a top priority for small business executives.

At the same time, the Fed continues to buy at least $ 120 billion worth of bonds every month and keep short-term borrowing benchmarks near zero.

“I think the reality is that housing is clearly not needed at the same level,” Moynihan told CNBC’s Becky Quick during a “Squawk Box” interview. “The question is, when do you remove it? And the big debate is, when is it? [inflation] ephemeral or not ephemeral. “

With consumer price inflation of around 5% yoy, the Fed is well above its inflation target of 2%.

However, policymakers insist that the recent surge is due to factors that will pass, including supply chain bottlenecks and pandemic demand, while annual numbers are skewed by the state of the economic crisis in 2020.

“That’s the real question,” said Moynihan. “I think we have to be much more careful now than before because we see wages go up, you see prices go up. … are they temporary? Probably, but we won’t know until we … get there. “

The banks are inundated with deposits and reserves while the Fed keeps interest rates low and buys government bonds and mortgage-backed securities every month.

At the same time, Moynihan said consumer spending has increased 20% since 2019 and small businesses have moved from damage control mode to battling rising demand.

For small businesses, “Six months ago it was all about pandemic, pandemic, pandemic,” Moynihan said. “So what’s the word now? Workers get and inflation and shortages.”

Moynihan said these pressures lead to price increases.

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