NEW YORK- US bank executives on Tuesday raised concerns about the impact of a sustained period of higher inflation, adding to pressure on the Federal Reserve to accelerate plans to wind down the pace of its asset purchases.
Senior bankers are increasingly concerned that higher inflation could impact borrowers’ ability to pay back loans, slow US economic growth and destabilize stock markets.
Wells Fargo Chief Executive Charlie Scharf said at a conference that the US central bank may need to move quicker to address inflation concerns. Goldman Sachs CEO David Solomon said he anticipated a period of higher inflation.
Bank of America CEO Brian Moynihan said his bank was running internal health checks to ensure its portfolios could withstand a return to 1970s-style inflation.
“We’ve been doing that for three or four quarters now figuring that we’d be at this place where inflation is real and out there,” Moynihan said at the Goldman Sachs Financial Services Conference.
Annual US inflation increased from 1.4 percent to 13.3 percent from 1960 to 1979, while the country’s economic growth stagnated.
That had a marked impact on people’s lives, with the value of savings and the purchasing power of fixed incomes like pensions being undermined.
US inflation is running at more than twice the Fed’s flexible 2 percent annual target.
The International Monetary Fund last week warned of intensifying inflationary pressures, especially in the United States, and said US central bankers should focus more on inflation risks.
“There’s a case to be made that they (the Federal Reserve) should be moving faster than they’ve been moving,” Scharf said.
“Inflation is very, very real,” he said. “Prices are significantly higher for inputs across most industries. Labor shortages and wage increases are extremely real. Whether that continues for several years is not all that relevant, but it certainly will have an impact over the next year or so.” — Reuters
