Left to right: PNC Financial Services CEO William Demchak, JPMorgan Chase CEO Jamie Dimon, Citigroup CEO Jane Fraser, Bank of America CEO Brian Moynihan, Truist Financial CEO William Rogers Jr and Wells Fargo CEO Charles Scharf are seen in a hearing on Capitol Hill
Higher interest rates and grinding inflation are likely to begin taking a higher toll on US consumers who have so far mostly managed to remain in healthy financial shape, bank CEOs told a congressional panel Wednesday.
The heads of the largest US banks warned in particular that low-income households face duress, as they appeared at a lengthy hearing before the House Financial Services Committee ahead of the Federal Reserve’s announcement of an interest rate hike of three-quarters of a point.
“It’s early days still in terms of seeing the impact of high interest rates on the consumer in the States,” said Citigroup Chief Executive Jane Fraser. “Fortunately, they entered this period with pretty strong balance sheets.”
Fraser warned of “greater stress” for consumers with low credit ratings, predicting a drop in savings rates and “tougher times ahead” in general.
Remarks on the economy were interspersed as bankers navigated politically charged questions on climate change, President Joe Biden’s regulatory policies, executive leadership diversity and other topics.
Andy Cecere, chief executive of US Bancorp, said that while savings rates remain above pre-pandemic levels, they have “stabilized” the last three months after growing consistently for the prior 18 months.
“The things that people are spending money on have changed substantially from discretionary to non-discretionary items like food and gas,” Cecere told the panel.
“It’s appropriate that we’re very focused on inflation, because again, it is most harmful for those who afford it the least.”
JPMorgan Chase Chief Executive Jamie Dimon said American consumers are in “rather good shape” with low debt levels in a strong jobs market.
But Dimon said the economy faces an uncertain course, with only a “small chance” of a soft landing to the Fed’s monetary tightening policy.
Dimon said there was also a chance of a “mild recession” as well as a “harder recession, noting that in light of the war in Ukraine and the drag on food and energy supply, “there’s a chance it could be worse.”
“And I think policy makers should be prepared for the worst,” Dimon added.
