Transcript for Big bank CEOs on Capitol Hill
- The last few volatile years have brought stress and disruption to so many as the world grapples with war in Ukraine, economic volatility, and inflation, energy insecurity, and climate change, and a pandemic.
- We are very concerned about the high prices that consumers are facing in America, and indeed around the world. We certainly have lived through very unusual times, through the pandemic or the recovery from that and then the impact greatly exacerbated by the war in Ukraine. So the impact of the higher rates that are required to try and tame the inflation is likely to be moderating growth in America and around the world and will be putting pressure on many of the drivers of the recovery that we've been looking for.
- Inflation is impacting those who can afford it the least. Consumer spend levels in total are about 10% above last year. The things that people are spending money on have changed substantially from discretionary to nondiscretionary items like food and gas, as you mentioned. And I think it's appropriate that we're very focused on inflation because, again, it is most harmful for those who afford it the least.
Savings levels continue to be above prepandemic levels across all stratas of deposit levels, from 2 to 4 times. However, they're stabilized. For 18 months they were growing each and every month. And they've stabilized the last three months. Credit card spend rates continue to be high and payment rates are actually starting to normalize but still well above prepandemic levels.
- Fortunately, they entered this period with shock-- with pretty strong balance sheets. But we would anticipate that if interest rates remain high in order to tame inflation that we will see greater stress, particularly in the lower FICO scores, in credit and that we will also see the savings rates coming down further than we have done. I think we're fortunate to have had the consumer in good health entering into this. But we do expect we're going to be in for tougher times ahead.
- So I think you've heard the American consumer's still in actually rather good shape. They're spending money, 10% more than in prior years. They have a good balance sheet. Their debt balances are low. Their confidence levels are going up. Jobs are plentiful.
I think it's a good thing that wages have gone up for the lower end. That's all the good news. That's being met by other forces, which we don't know the full effect of. That's war in Ukraine, oil prices going up, interest rates going up, inflation, and the worst possible outcome is stagflation. And so those things will actually cause a slowdown in the economy, at one point, increase unemployment. And we don't know the full outcome.
I do not like to make forecasts. I don't think I've ever seen anyone forecast the future properly. I look at probabilities. I think there's a chance, not a big chance, a small chance of a soft landing.
There's a chance of a mild recession, a chance of a harder recession. And because of the war in Ukraine, I think the uncertainty that causes in global energy supply and food supply, there's a chance it could be worse. And I think policymakers should be prepared for the worst so we take the right actions, if and when that happens.
This transcript has been automatically generated and may not be 100% accurate.