Bank heavyweight on whether a US recession looms

Bank of America CEO Brian Moynihan revealed on Wednesday, during an exclusive interview with "Mornings with Maria," whether he believes a recession in the United States is expected this year as inflation accelerated to a new four-decade high.

"The Fed knows they have a job to do to tackle inflation and the question is, what happens on the other side of that," Moynihan told host Maria Bartiromo, stressing that "that’s one of the tricky executions."

He noted that "the debate is [whether] there’s a recession on the other side." 

"Our people don’t think so," Moynihan continued. "They have this year’s growth at 3% plus, next year’s growth just under 2 [%], which will be under the long-term trend."

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A recession refers to a contraction in gross domestic product (GDP) activity, the broadest measure of goods and services produced across the economy, for two consecutive quarters.

Ticker	Security	Last	Change	Change %
BAC	BANK OF AMERICA CORP.	46.99	+0.55	+1.17%

Moynihan stressed that Bank of America does not "see the recession, but that doesn’t mean it will be perfectly aligned to inflation coming to check." 

Supply chain constraints, the Russian war in Ukraine and strong consumer demand fueled rapid price gains last month, which wiped out the benefits of rising wages for most Americans.

The Labor Department said earlier this month that the consumer price index (CPI) – which measures a bevy of goods including gasoline, health care, groceries and rents – rose 8.5% in March from a year ago, the fastest pace since December 1981, when inflation hit 8.9%. Prices jumped 1.2% in the one-month period from February, the largest month-to-month jump since 2005.

Price increases were widespread: Energy prices rose a stunning 11% in March from the previous month, and are up 32% from last year. Gasoline, on average, costs 48% more than it did last year after rising 18.3% in March on a monthly basis as the Russian war in Ukraine fueled a rapid increase in oil prices. 

"Behind that, wage growth is strong and labor shortages are strong, so there’s a lot of dynamics going on," Moynihan noted on Wednesday. "Obviously businesses are still struggling getting things to sell, cars, and just struggling and that means there’s pent-up demand, which will lengthen the cycle." 

"We’re fairly optimistic in that we believe growth in the next couple years as a company and everything we see supports that," he continued. 

Moynihan also noted that the U.S. "had the longest recovery cycle leading into the pandemic." 

"The pandemic changed everything," he said, noting that a pandemic-induced recession took place. 

He noted that "the federal government, Congress and the administration pushed so much money and they actually spackled over the recession." 

"So potentially, you can view this as we’re still in this long recovery cycle from the financial crisis and that it got interrupted by this moment in time," Moynihan told Bartiromo.  

He noted that the question now is what is the geopolitical risk for growth given the war between Russia and Ukraine. 

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"That’s where the next round comes in, food issues, Europe growth issues, China issues… shutdowns that all could impact the ability for the U.S. to keep growing, but the U.S. is the place to be right now," Moynihan said. 

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FOX Business’ Megen Henney contributed to this report.