As the urgency for the pandemic-related response is reducing, Bank of America’s CEO Brian Moynihan on Monday said that Fed Reserve can ease up on its ultra-easy monetary policy.
Speaking a day earlier than the central bank’s June policy meeting, the head of the second-biggest U.S. banks by assets said that inflation-related concerns are top of mind for small business executives.
At the same time, the Federal Reserve is continuing to buy not less than $120 billion of bonds every month and is holding its benchmark short-term borrowing rates close to zero.
With consumer price index inflation around 5% from the last few years, the Federal Reserve is well ahead of its 2% inflation goal.
However, policymakers are insisting that the recent rise in inflation is due to factors that will pass in due course of time as the economy is on move due to the coming out of the pandemic.
Moynihan said, “I think that we have to be much more careful right now than we’ve been because we’re seeing wages grow, you’re seeing sticky prices grow. Are they transitory? Probably, but we won’t know until we get there.”
Banks are flooded with deposits and cash reserves while the Federal Reserve is holding rates down and keeps buying mortgage-backed securities and treasuries every month. Also, as the economy is opening and consumers are spending 20% more compared to 2019, all these pressures are causing price increases and that is leading to increased inflation.
Keeping all this in mind, the Bank of America’s CEO is encouraging Fed Reserve to ease up on its ultra-easy monetary policy.