Bank of America CEO Brian Moynihan slammed the Biden administration this week for playing semantic games over economic woes.
What is the background?
Ahead of an economic report that showed the United States experienced two consecutive quarters of GDP contraction — thus meeting the traditional definition of “recession” — the Biden administration repeatedly downplayed the definition.
“In terms of the technical definition, [two negative quarters of growth] is not a recession,” said Brian Deese, director of the National Economic Council. “The technical definition considers a much broader spectrum of data points.”
What did Moynihan say?
Splitting hairs over whether the U.S. is actually in a recession demonstrates how out of touch the Biden administration is with the sentiment of everyday Americans, Moynihan told the Associated Press.
“Recession is a word. Whether we are in a recession or not is really not the important thing,” Moynihan said. “It’s what it feels like for the people going through this.”
Even with the Biden administration celebrating “zero inflation” in July, Moynihan, who leads the second-largest bank in the U.S., said he remains concerned about high gas prices and especially skyrocketing rent prices.
“Gas prices are coming back down, but rents are going up 10, 12, 15%. And rent can end up taking 40% of these households’ income,” Moynihan said. “We are worried about, for the U.S. broad-based consumer, is the increased rents as we go into the natural turn of rents.”
Indeed, according to the Bureau of Labor Statistics, shelter prices rose 5.7% year-over-year in July, which the agency explained amounted to “about 40% of the total increase in all items less food and energy” — just as Moyinhan said.
On the question of whether the U.S. is, in fact, experiencing a recession, Moynihan told the AP he would leave that decision to the National Bureau of Economic Research.
Famed economist Nouriel Roubini predicted this week the U.S. economy has two trajectories: “unhinged” inflation or a “severe” recession.
He thus suggested the Federal Reserve aggressively hike baseline interest rates above even 5% to try and lower inflation to the Fed’s targeted rate of 2%.
“The Fed funds rate should be going well above 4% — 4.5%–5% in my view — to really push inflation toward 2%,” he said in an interview with Bloomberg.
“If that doesn’t happen, inflation expectations are going to get unhinged,” Roubini predicted. “Or if that happens, then we are going to have a hard landing. So either way, either you get a hard landing or you get inflation getting out of control.”