The American consumer is still strong despite roaring inflation, and that will pose a challenge to the Federal Reserve’s mission to tamp down inflation, Bank of America CEO Brian Moynihan told CNBC’s Jim Cramer on Wednesday.
“One of the toughest jobs they have is the American consumer is still in pretty good shape,” Moynihan said in an interview on “Mad Money.”
“Data through last Friday basically says that for the month of July … [spending] is up about 10 percentage points from last year’s July first three weeks. And the transaction growth is 6% to 7%, so that means it’s growing,” he added.
Moynihan’s comments come after the Federal Reserve raised interest rates by 0.75 percentage point on Wednesday afternoon and indicated it could take a softer approach with future rate hikes, though Chair Jerome Powell left the door open about the next move.
The chief executive said the bank feels good about the state of the American consumer, noting that consumers’ spending on experiences in particular is holding strong.
“People are spending on vacations. European transactions are through the roof right now. Spending on vacations, theme parks; home improvement [is] a little bit more mitigated, but still holding on bigger than ’19,” he said.
He added that it’s not only affluent Americans who are choosing to spend this summer. Median-income earners who had around $3,500 in their accounts pre-pandemic have about $13,000 now, and their cash flow is still positive, though under pressure due to inflation, according to Moynihan.
High rent prices also threaten to keep inflation from coming down. While some cities saw a decrease in median rent prices earlier this summer, the average rent for an apartment in Manhattan was a new record, at more than $5,000 last month.
“Overall, gas seems to be mitigating, house prices seem to be mitigating, so I think it’s starting to work, but we’ve got to watch and make sure rent doesn’t kick it back through the roof,” Moynihan said.
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