Wall Street had a rough week last week, with the Nasdaq down nearly 5%, and one reason was an unnecessary dose of pessimism from one of the country’s most influential bankers.
Bank of America CEO Brian Moynihan recently warned that the Federal Reserve needs to raise interest rates three more times this year to tame inflation. Coming from the head of the nation’s second-largest bank, those comments understandably rattled investors already on edge about AI overspending.
But they are dramatically misguided. So much so that they seem like an attempt to jawbone the economy downward to help Democrats in this year’s midterm election.
Observe how the inflation scare that briefly flared after the conflict with Iran has already begun to dissipate. The price of oil has returned to pre-War levels. Since energy costs are an input in all goods and services, this price normalization removes the inflation risk.
In other words, this inflation was truly transitory, a stark contrast to the prolonged inflation under President Joe Biden. While inflation numbers will remain elevated for the next couple of months, they reflect residual, not current, pressures.
Small business owners understand that inflation is a blip better than anyone else. As recent jobs numbers have shown, they continue to hire. Employers added 172,000 jobs last month, unemployment remained low at 4.3 percent, and previous job gains were revised upward by 93,000.
According to the Census Bureau, more than 500,000 small businesses were created in April, the fifth highest on record. Since last year’s Republican tax cuts, small-business creation has been approximately 20% higher than the post-COVID average. Unlike Moynihan, they are not putting too much stock in temporary war-induced price hikes.
In addition to being backward-looking, Moynihan’s comments ignore how long-term interest rates have fallen significantly in recent weeks with the appointment of Kevin Warsh as Federal Reserve Chairman. This demonstrates investors are confident inflation will moderate without requiring additional monetary tightening. Moynihan is looking at inflation through the rear-view mirror, while Warsh is looking through the windshield.
Unfortunately, this isn’t the first time Bank of America has found itself at odds with small business owners and conservatives. The bank has repeatedly inserted itself into contentious public policy debates — putting politics ahead of profits and virtue-signaling ahead of its customers and employees.
For example, Moynihan was a vocal opponent of Georgia’s commonsense election law that made it easy to vote but hard to cheat. Under Moynihan, Bank of America has been one of the leading advocates for Environmental, Social and Governance (ESG) investing among major U.S. banks.
And Moynihan was a major backer of the Business Roundtable redefining the purpose of corporations to serve stakeholders rather than shareholders — a move that allows progressive causes to hijack what’s best for businesses, employees, and the economy.
America has already paid dearly for years of elevated borrowing costs. Small businesses have delayed expansions. Entrepreneurs have shelved investments. Families have postponed home purchases. Every unnecessary month of excessively tight monetary policy carries real economic consequences.
In reality, inflation will ease over the coming months without necessitating painful rate hikes and even allowing the Fed to resume its rate-cutting guidance. Moynihan’s prescription should be taken with a donkey-sized dose of salt.
Alfredo Ortiz is CEO of Job Creators Network, author of “The Real Race Revolutionaries, and co-host of The Main Street Matters Podcast.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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