Brian Moynihan, CEO of Bank of America

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NEW YORK (AP) — As CEO of Bank of America since 2010, Brian Moynihan has been widely credited with rebuilding the bank after the Great Recession and financial crisis.

Moynihan points to continued strength in consumer spending despite high inflation for four decades and worries about the economy and the pandemic. Spending on the bank’s credit and debit cards in January was up 17% from a year earlier. This despite the fact that January is generally a slower month following the frenzy of the holiday shopping season.

Moynihan spoke with The Associated Press about the data, as well as his thoughts on inflation and the Federal Reserve. The interview has been edited for clarity and length.

Q: Why do you think these higher spending numbers in January matter?

A: So the story we’ve heard is that consumer spending increased significantly in the fourth quarter and it looks like this trend will continue. We see that our customers’ overall spending on credit, credit hold, debit cards, cash withdrawn from ATMs, etc. remained strong. Now some of that payments growth could help us gain market share over our competitors, but 17% growth shows that there’s some kind of behavioral change underway, even with a strong economy. growth.

Q: Could inflation be behind the rise in consumer spending?

A: Consumers have a lot more money in their accounts than before the pandemic, helped by the stimulus. Admittedly, consumers are still struggling because of inflation. Also in our data, the number of transactions is up almost 10%. It’s very strong. Nobody spends three times more than because of inflation.

Q: Is the increase in spending due to consumers going into debt, putting money on their credit cards or borrowing to meet their expenses?

A: Consumer account balances continue to accumulate. This means that these higher salaries have been a net positive even with their increased expenses. On the other hand, they don’t leverage it. Look at credit card balances. We’re still 15% behind where we were before the pandemic and if you look at the payment rates on those credit card balances, they’re still running at a very high rate. This tells me that consumers are not going into debt to maintain this spending.

Q: Why is this strong consumer spending a good thing and what should the Fed do about it?

A: The good news is that they are still spending even though the stimulus has largely run its course. Two-thirds of the economy is driven by consumer spending. The question is whether this will create inflation, supply chain and labor shortages. That’s why the Fed needs to do what it said it was going to do, which is it’s time to normalize interest rates. Before the pandemic, we had a strong economy and interest rates were two percentage points higher. We expect this economic growth to slow, but this will be boosted by the normalization of Fed monetary policy.

Q: How do companies deal with inflation?

A: If you’ve talked to small businesses – and we’re one of the largest SBA lenders in the country, so we’ve talked to almost everyone – what you hear is that the problems are the shortages of labor and labor costs. Pretty much the only constraint to growth is things like supply chain shortages.

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