Economic growth isn't slowing down, says Bank of America Chief Executive Officer Brian Moynihan – it's just facing a "mitigation."
Many experts believe that interest rate increases are causing the economy to slow, which could lead to a recession in the near future. But Moynihan told CNBC's Squawk Box that consumer spending is high, and many still have strong credit, there is low unemployment, and wage growth is stable. The gross domestic product (GDP) also grew in the third quarter and is currently expanding at a rate that's higher than expected. While changes in these areas could be coming, Moynihan says, it’s all still up in the air.
"I would not confuse credit risk with pricing risk," Moynihan told CNBC. "Growth and earnings may be slowing down because the economy recovered very fast and had major growth that flattens out a little bit."
Interest rates are mainly affecting the home and automotive industries, which are seeing huge slowdowns. According to Moynihan, the Federal Reserve will hike Inflation rates by 75 basis points and 50 basis points during their remaining two meetings of the year. The economy will also see two 25-basis-point increases in the first two meetings of next year.
While many debate whether the economy is already in a recession or heading for one, Moynihan claims that the risks should not outweigh the fact that consumer behavior is unchanging. He also notes that there are signs that the shifts in the two aforementioned industries could begin to impact other areas of the economy. He estimates that, in particular, the slowdown in home buying will invade rental markets, causing rental prices to jump up in the next year. This could put consumers in a tight position, Moynihan says, regardless of the state of their balance books.
