Estimated reading time: 2 minutes
By: Ken Chase
The CEOs of two of the nation’s largest financial institutions, Bank of America and Wells Fargo, warned that consumers appear to be pulling back on spending in recent weeks. That news suggests that the Federal Reserve’s ongoing interest rate hikes are beginning to have a direct impact on American consumers’ ability to prop up an uncertain American economy.
At a financial conference this week, Wells Fargo CEO Charlie Scharf pointed to a slowdown in credit and debit card spending as evidence that consumer behavior is being impacted. Meanwhile, Bank of America CEO Brian Moynihan noted that his bank has seen a similar decline in its customer spending activity.
Scharf suggested that there is no question that a slowdown is underway and suggested that it would have a negative impact on the economy next year. “We are expecting a fairly weak economy throughout the entire year,” he said, “and hopeful that it’ll be somewhat mild relative to what it could possibly be.”
Moynihan’s forecast included an expectation that the economy would experience negative growth for the first three quarters of 2023. Both he and Scharf said that a recession is likely to occur next year.
As Moynihan noted, the slowdown they are witnessing is in line with what the Fed wanted to see as it continues to battle against the current high rate of inflation. Like many other observers, however, he suggested that the real test is whether the Fed will be nimble enough to slow the economy in a way that helps to control inflation while avoiding a severe recession.