Brian Moynihan, CEO, Bank of America ~ 2026-SEP-23 Wednesday

So, I think you have to sort of separate short-term rates, long-term rates, and because there's different impacts. But the number one thing is that inflation's higher than people want it to be in the targets and they're going to wage the war on it. So, they raised 25 basis points recently. Our team still has two more rate rises this year. So they were a bit out there with three. I think now it's probably not as bit out there. But their view is it'll take even with a three rate rise it'll take to the end of '27 to start to approach 2% and into '28. And you know inflation's sticky. It's hard to get out of the system. And there's been different impacts. So you know two years ago when we started talking about inflation it was one set of impacts but now it's the follow-through from oil prices and the products you're starting to see. Wages are starting to grow faster. So there's a lot of different impacts over time, but they've got to get the rate structure right. Now the good news is this. People think this is higher and it's actually more normal to have a rate structure with a 3, 3 and a half, 4% Fed funds rate to you know four and a half, 5% 10-year rate. That's more of a natural curve and a curve that is consistent with a growing strong US economy. So a little bit is just getting used to a different environment than we were post financial crisis for many many years. We barely got back to it. COVID hits, we get back again, they start cutting rates, people are worried and now it's back. So, we'll play out. The longer term is more affected by the budget deficit and we got to get that under control. The demand for bonds, people having alternatives that are crowding out US Treasury rates because other rates are three, four, 500 basis points better for that are pretty good credits. And so, there's a lot of that dynamic going on which is much more impactful as you go out the curve. But inflation's got to get under control. The Fed has already moved once. I think they'll continue to move whether it's two times this year again or one time and one time early next year, but over the next six months to 12 months, they'll have to move the rate structure up to make sure the inflation continues its path down.

Our net income is very strong growth anyway because of the dynamics of our balance sheet, but we sit with $2 trillion in deposits. The total rate paid to the customers is 2%. And that's because a bunch of them are checking accounts and transactional accounts for businesses. So when rates go up, it actually benefits our company. That's been true forever. The nominal rate environment is actually important to banks because we were so low with a zero floor. It went a half a percent Fed funds rate and you don't charge people to keep their money. What would happen then is you got squeezed. That is out of the system now at this type of rate range. So you have more up and down when rates move, but as long as the economy stays strong creditwise, spending wise, and things like that, it's a good environment for banking.