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The Federal Reserve Chair, Jerome Powell, also played a role in shaping this change when he informed reporters that the central bank’s own economists no longer foresaw a recession.
Despite an aggressive Federal Reserve tightening cycle, the US economy showed resilience this year, leading many on Wall Street to adjust their forecasts for the recession’s timing. Recent data reflected sustained strength in hiring along with moderating inflation, prompting forecasters to reevaluate their recession predictions altogether.
Moynihan said that the probability of inflation accelerating again was low. However, he cautioned that “fiscal drag” from higher interest rates could still be a constraint, leading to tighter lending conditions.
In the Bloomberg interview, Moynihan also touched on the topic of proposed new capital requirements for the largest US banks, which he believed might inadvertently push some banking activities into less-regulated sectors.
“If you get the capital regulations — the banking system — too tight, you push things back outside the tent, and that’s a concern,” Moynihan said, as quoted in Bloomberg.
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