Bank of America expects elevated inflation to stick around through the remainder of the year and has adjusted its reserves to prepare for it, executives said Monday.
In an earnings call with investors, Bank of America CEO Brian Moynihan and CFO Alastair Borthwick both touted the strength of US consumers showing trends of lower credit balances and higher bank account deposits, but said the bank does not see prices normalizing in the short term.
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“We’re obviously aware of what the [Federal Reserve] is trying to engineer,” Borthwick said on the call. “So going through this every quarter, as we always do, we have an opportunity to think about how we look at our reserves. And this quarter, we took some of the upside height. We’ve got a little more weighting towards a baseline and a little more towards downside.”
“We’ve upped our forecast for inflation, so we see that playing through,” Borthwich went on to say, adding, “And those scenarios are a little more weighted towards inflationary.”
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Moynihan said Bank of America is “very strong in reserve” and reiterated that the bank continues to adjust its reserve levels “to factor in – our base case includes higher inflation for the rest of the year.”
The CEO said that in general, he feels “the Fed has a task to bring inflation out of the system.”
The comments from Moynihan and Borthwick follow a Bank of America analysis last week sounding the alarm that the US could soon be in for a “recession shock.”
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In a note to clients, BofA chief investment strategist Michael Hartnett warned that surging inflation coupled with an increasingly hawkish central bank could lead to an economic downturn, writing, “‘Inflation shock’ worsening, ‘rates shock’ just beginning, ‘recession shock’ coming.”
FOX Business’ Megan Henney contributed to this report.