Moynihan’s comments add a notable voice to the debate over the Fed’s rate path, with a sitting major bank CEO putting a specific number and timeline on expected hikes rather than the more hedged language typical of Fed officials themselves. His view that three hikes are needed to tame inflation, paired with a slower return to the 2% target than markets may be pricing, could weigh on rate cut expectations and pressure front end yields higher if the market takes his comments as a signal of institutional consensus. His remarks on AI financing are notable for equity markets, suggesting BofA sees limited risk that higher rates derail the current capex cycle, which could support sentiment toward AI infrastructure and semiconductor names even in a higher rate environment. Combined with recent PCE data running well above target, his comments reinforce a narrative of stickier than expected inflation persisting into 2027.
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BofA’s Moynihan says the Fed likely needs three more hikes this year to tame inflation, but doesn’t expect that to derail the AI infrastructure boom.
Summary:
- BofA CEO Brian Moynihan expects the Federal Reserve to raise interest rates three times this year, in September, November and December
- He said this expectation could change if inflation data continues to come in better than expected, as it reportedly did last month
- Moynihan expects inflation to reach the “mid-2s” by the end of 2027, before eventually returning to the Fed’s 2% long-term target
- He attributed the recent pickup in inflation to the effects of tariffs and the war, which he says are now fading
- The PCE Index rose 3.7% annualized in June, while core PCE, which excludes food and energy, rose 3.3% annualized, up 0.1% month on month
- Moynihan said he does not expect rate hikes to affect short-term financing for AI infrastructure buildouts, and that data center returns are strong enough to absorb higher long-term borrowing costs as well
Main article:
Bank of America Chief Executive Brian Moynihan said he expects the Federal Reserve to raise interest rates three times this year, a view that stands out for its specificity relative to the more guarded language typically offered by Fed officials themselves.
Speaking in an interview with CNBC, Moynihan said he expects hikes in September, November and December, adding that policymakers currently believe three increases would be sufficient to bring inflation under control. He noted, however, that the outlook could shift if inflation data continues to surprise to the downside, pointing to a recent month in which price growth came in better than expected. “If it goes better than, like last month, it went down better than people thought, then I’m sure they would change that expectation,” he said. “But right now, they think that three hikes gets the Fed in a place that they can have the inflation tamed.”
On the trajectory for inflation more broadly, Moynihan said he expects price growth to settle in the “mid-2s” by the end of 2027, before gradually moving down into the Fed’s longer-term 2% target range after that. He attributed the recent resurgence in inflation to the combined impact of tariffs and the ongoing war, both of which he said are now beginning to fade as drivers of price pressure. “If you look at the issues of inflation rolling through the economy, it was mitigating and then popped back up because of the impact on prices from tariffs, impact on prices from the war, and that’s coming back down,” he said.
His comments follow data released last week by the Commerce Department showing the Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, rose 3.7% on an annualized basis in June. Core PCE, which strips out volatile food and energy costs, increased 3.3% annualized, up 0.1% on the month, underscoring that underlying price pressures remain well above the central bank’s target.
Moynihan also addressed the potential impact of higher rates on the artificial intelligence infrastructure buildout, an area of the economy that has drawn heavy investment from major technology companies. He said he does not expect further rate increases to meaningfully affect the short-term financing companies are using to fund data center and AI infrastructure projects. He added that the returns being generated by data center investments are strong enough that companies should be able to absorb higher borrowing costs across long-term bonds as well, suggesting the AI investment cycle is unlikely to be significantly disrupted even if the Fed follows through with additional hikes this year.
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September, October and December are the three meeting to come for the remainder of this year.
This article was written by Eamonn Sheridan at investinglive.com.