Tags: bofa ceo | Moynihan | fed | rate hike

BofA CEO Moynihan Can't Wait for Fed to Hike Rates

BofA CEO Moynihan Can't Wait for Fed to Hike Rates
(Dollar Photo Club)

By    |   Wednesday, 11 November 2015 08:03 AM

Bank of America Corp. Chief Executive Officer Brian Moynihan doesn't fear a Federal Reserve rate hike.

“It’s a strong economy,” Moynihan said in an interview with Bloomberg Television’s David Westin. “Unemployment levels are down, and wage growth is picking up. That’s all good. Now the question is, what can derail that. And that’s what we have to pay attention to,” he said.

The Fed hasn't hoisted its benchmark rate in nearly 10 years, and it's been near zero since the 2008 financial crisis. Moynihan was asked what a rate hike would do for his business.

"We disclosed that basically it's $4.5 billion round numbers [in revenue] for every 100 basis points increase in rates, parallel rate rise," he said, "[W]hen you have half a trillion dollars in zero interest deposits that are always zero interest and have hit a floor, and when you have loans repriced or rates going up, it's a good thing for a bank. And this has been a very tough environment," he said.

He cited last week's jobs report as evidence that the economy can shoulder higher rates. "The reality is what that really showed is the fundamental underlying strength of job formation, which is the critical thing," Moynihan said. 

He also is upbeat about the housing industry.

"Housing starts are now up year-over-year about 10 to 15 percent, and multifamily housing is still very strong," he said. "That’s also creating job development because construction projects can’t be imported. In other words, you have to build the house locally. You may be able to bring in some of the materials at the end of the day," he said.

"And so that kind of investment in people’s homes we’re just seeing the people borrowing on home equity loans, and starting to put a new roof on, put a new air conditioning system, rehab a room. And that plus the new housing building is providing a stronger base for construction employment, which is good."

He is also optimistic about the bank's future as well.

"We’ve positioned the company and rebuilt the earnings stream, have gotten through the mortgage crisis, and now have a simpler, more straightforward, highly-capitalized company, which made $4 billion-plus in the last quarter. So we’re not sitting here waiting for rate rises, but it would make our life a little bit easier," he said.

To be sure, a top U.S. central banker said that now that the United States is closing in on full employment and inflation is likely to rise to target levels, the "next step" should be to start gradually increasing rates.

San Francisco Federal Reserve President John Williams said Tuesday there's a "very strong case" for the Fed to raise interest rates next month if the economy continues to improve and policymakers are confident that inflation will pick up.

"Assuming the data are consistent with those (conditions), I think there's a very strong case for starting the process of raising interest rates" at the Fed's next meeting, Williams told USA Today. "The next natural step...is to start raising rates and to do that gradually."

The Fed has kept interest rates near zero for almost seven years, and the central bank last month said it would consider a rate increase at its Dec. 15-16 meeting, the last of the year.

(Newsmax wire services contributed to this report).

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Bank of America Corp. Chief Executive Officer Brian Moynihan doesn't fear a Federal Reserve rate hike.
bofa ceo, Moynihan, fed, rate hike
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2015-03-11
Wednesday, 11 November 2015 08:03 AM
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