Bank of America CEO on inflation, impact of tariffs, housing affordability and more

WASHINGTON (CBS, KYMA) - Brian Moynihan, CEO of Bank of America, spoke with Margaret Brennan on Face the Nation Sunday about inflation.

According to Brennan, most Americans, when asked about the state of the economy, said their holiday items are difficult to afford and pulled back because "incomes are not keeping up with inflation."

This prompted Brennan to ask Moynihan, when he's looking at the upper income brackets to see the data of actual transactions, if people are doing what they say they're doing, and Moynihan said:

"We not only see it in the aggregate, we also see it in pieces. And so if you look in the aggregate, the amount spent through the Thanksgiving weekend, on you know, Black Friday and Cyber Monday through all the month of November and the first part of December, it's up four and a quarter, 4.5% versus last year's November. And so it's growing. And then if you look by terciles, three buckets of income levels, it's clear the people in the bottom income level, at lower income levels are spending a little faster growth rate, but still growing and in the middle and upper faster. So, you know, what they're telling you is, what they feel, what they're actually seeing, is spending is really solid, reasonably solid heading into the end of the year, and it's been kind of going along like that all of December. Now, wages have grown, but inflation bothers people. Jobs are you know, the unemployment rate's very low, but it's been rising. So there's a lot of discussion in there. At the end of day, people are spending they have good credit quality. They are employed, and wait...we can see wages growing in as people's paychecks come in at a 3% clip. So...it's pretty solid right now."

Brennan and Moynihan talked about tariffs, with Bank of America projecting President Donald Trump's strategy is one of de-escalation, leading her to ask if he sees the trade war with China cooling off, and Moynihan said:

"If you go back to where we were in April, there was a lot of lack of understanding about where this would end up, and that affected small businesses...The sheer size, the volume, the dollars, across the board, et cetera. What you say now, as times moved on, it's sort of a 15% on one side, and then a higher number based on people who won't commit to purchase from the US, or won't commit to lowering their non tariff barriers and things like that. And so the question, when I talk to foreign governments and they ask you the question about what's this all mean--or foreign CEOs--you say, look, you got a choice. You can be here or be here. You just have to make the choice. You're going to be- drive more towards America, and you will come down to 15% to go from a 10% across the board, to 15% for the broad base of countries, not a huge impact. And that's where our team says it's starting to- it's starting to de escalate, and that you're starting to see the resolution of the discussions into 15% here 17 different numbers. When you put China, China's a different question, because the national security interests, the rare earth minerals, the magnets, batteries, just AI, all that stuff. It's a very different case. And I think also between Mexico and China, the USMCA, which has to be redone, is also a different case. But broadly in the world, you can see sort of the end point here and now...it's got to work through the system."

Brennan followed up by asking how much of a toll has the tariffs taken on small businesses, and Moynihan said:

"We're the largest small business lender. If we were sitting here in the second quarter of this year, it was a big toll. They were very- because rates have gone up, and that costs them more money because they borrow on revolving lines of credit. In other words, they borrow a floating rate, and then the tariffs came in and caused them I'm not sure I can get the goods at what price and how can I commit? But as you went through the year, rates came down a little bit, so they're more their issue right now is, can I get the labor I need to do, to bid the contracts, to do the work I'm doing? Because the immigration policies haven't settled in yet, and that's causing people concern. It's not that they agree with them or are disagreeing. They just need to have the answer, and that's what they're looking for. So if you think across four policy regimes, tax-trade-tariff, immigration, and then ultimately, deregulation. You've seen a resolution of a lot of them, but I think the next one for small business, what they tell us is labor availability. How they get there is, I need people to do this work, and I need to be dependable. They're here. So give me a set of rules and I'll go play with them. But I need to be clarified what the rules are."

During the interview, Brennan and Moynihan talked about housing affordability and mortgages, with the Federal Reserve saying activity in the housing sector is weak.

This led Brennan to ask Moynihan what he sees is behind the hesitation, and he said:

"There are two parts to it. One is the rate structure is higher, so it's just slowed down the activity. So if people are going to sell a house to move up to a bigger house or something, the cost of debt is going to go up. So that's slowing down that activity. The second is building. And there's housing volume shortages all over the country...you could have single family, multi small multi floor units, things like that. Or even more, bigger multi family, major cities, but there's a universal housing shortage, because for so many years it's been hard to get housing permitted, and so the advice I give to anybody is you're probably not going to see the 10 year rates go down. Our teammates think the Fed funds rate gets the low of three and but the tenure rate stays between four and four and a half, which means the mortgage rate won't be a lot different than this today, but if you increase supply, you'll keep prices flat, and wages will grow through it. And you're starting to see prices have flattened out in many places. So you got to build supply, and you got to get permitting done, and you got to do that is probably the solution. Moving mortgage rates 50 basis points will not be a huge change. When you have a bunch of people 3% mortgage rates, that's not going to be changed. And by the way, for the American economy, we do not want to have an economy that has to have that low rate structure again, because that means we're not growing, we're not successful, and we're probably offsetting a recession. So we shouldn't be cheering for 3% mortgage rates. It was an anomaly that happened, and now we got to get back to normal."

Later in the interview, Brennan and Moynihan talked about Bank of America's relationship with President Trump after he said the bank declined to open new accounts for him and his family after his first term in office.

When asked if things are copacetic between the bank and the White House, Moynihan said, "Yes."

To watch Brennan's full interview with Moynihan, click here.