Bank of America CEO Warns Fed Needs to Monitor Trump Administration's Fiscal Policies
Davos, Switzerland - Bank of America CEO Brian Moynihan has emphasized the need for the Federal Reserve to carefully consider the Trump administration's fiscal policies when determining monetary policy.
"The monetary policy has to respond to a new administration with a new set of fiscal policies," Moynihan stated at the World Economic Forum in Davos.
Moynihan stressed that the US economy is not "a central bank-led economy" but rather "a private sector-led economy of which the government supports." He highlighted the central bank's responsibility to respond appropriately to government stimulus.
The Federal Reserve has recently signaled a more cautious approach to rate cuts, with a consensus among Fed officials for two rate cuts this year instead of the four forecast in September. Concerns about inflation and a stronger-than-expected US economy have influenced this decision.
Moynihan also expressed concerns about potential moves by the Trump administration, such as tariffs on China, which could further exacerbate inflationary pressures. The rise in oil prices has also contributed to market uncertainty.
Despite Fed uncertainty, Bank of America shares have rallied since Trump's election. Industry experts attribute this rally to potential lighter regulations under the Trump administration, particularly regarding capital requirements.
"I think what we want to see is capital [requirements] a little more rational," Moynihan said. "And then secondly, you want to take a look at some liquidity and other rules, which... have an adverse effect on carrying capital."
Bank of America reported strong fourth quarter results, with increased revenue and net earnings. The surge in investment banking and trading businesses contributed to the company's performance.
"Credit quality remains strong, underlying the conservative approach to underwriting," RBC Capital Markets analyst Gerard Cassidy said after Bank of America's Q4 earnings results.