So we have that eight cuts over two years. Inflation gets down to the target for the Fed at the end of '25. So it takes some time. And people say it's higher. But in the grand scheme of history, that's not higher. It's just higher since the financial crisis. On a global basis, rates fell. And now they're coming back up to be a little lower.

JULIE HYMAN: So there's what the sort of official forecast from your researchers say. And then there's what people say. And you talk to an enormous number of people. You talking to a lot of people here in Davos. You talk to a lot of business leaders in the US. What's the vibe like? Maybe there's going to be a soft landing. But how are people feeling?

BRIAN MOYNIHAN: Well, if you think about over the course of last year, this Davos, last Davos, this Davos, everybody last year was recession coming and inflation is high and the Fed and the central banks around the world-- if you think about all that, that creates a pretty pessimistic air for people to operate in. So what happened during the course of the year is confidence came down by consumers. They slowed down their spending from a 10% year-over-year growth rate to 4% to 5%, which is more normal.

And so that all affects people. Small and medium sized-business in the US, we have 12 million small business customers we have tens of thousands of mid-market customers, their line usage flattened back out. So pre-pandemic, they'd use 40% of their line of credit availability on a given day. During the pandemic, it dropped to 30 because things slowed down. Rose back up to 36. Then has been bouncing around 35, 36. It didn't keep going back up to the level it was. That's a conservatism built in.

And so that's what's kind of going through. That's what you read about. And inflation attacks people's ability to provide for their families and stuff. And so that's the pessimism. The reality, though, is look at what they do. They're still spending at 4% to 5% more in the first part of '24 versus the first part of '23. They are still going out. Restaurant spending is still very strong. Entertainment spending is still very strong.

So if you really, really, really worried about your day-to-day thing, you wouldn't do that. So what's happening is people are getting more conservative. They're making the choices in the median income households. They're making choices about what to buy, what not to buy. But the rate structure slow down, car purchases, house purchases. But fixed-rate mortgages give people an anchor against windward.

But their spending hasn't changed as much as their emotions have. And now you're seeing they're coming a little bit more in line as you see confidence bit. Views of inflation's stayed in check. And that's kind of interesting right now.

BRIAN SOZZI: Brian, every time we talked to you in 2023, the consumer always seemed to be surprising to the upside, to your point. Spending more on services, spending maybe a little more than some people thought on hard goods. But as we near the election in this country, there's been a real, I think, a lot of concern amongst leaders have been talking to about how that election might turn out. Do consumers finally pull back because they fear an outcome?

BRIAN MOYNIHAN: I don't think so because election goes on consistently. The dialogue's out there that all you and your colleagues put out there. So not like people didn't know the '24 election was coming. And by the way, there was a congressional election the half year. So there's always something going on in state and local level.

So the real-- you have the geopolitical risk out there. You have the fact that governments have to slow down their rate of spending growth. They a lot of fiscal stimulus. They have to bring that back in. The United States has to get its budget more in line. Whoever's in office understands that. That's not a mystery. That's why you have the debates in Congress among the whole Congress. How do we start to balance the decision?

So that that's got to go on. By the way, that's universal around the world. And so the idea of getting government spending and local governments and state governments, US, same things getting that. So those are drags and possibilities. But meanwhile, just follow what the consumer does versus what they say, which is the first two weeks in January they spent 4.5% more than they spent last year or two weeks in January. And so they're continuing to participate in the economy. Why? Because they're employed. Why? Because the wage growth has been strong. Flattening out, but stronger.

And so if you're employed and you have money, you're going to make the choices. And so I think the election will affect that. But they've sorted through a lot of elections in our country's history and all the other countries. So I don't worry about the elections doing it. There'll be a lot of talk about the impact. But I think the reality is the US economy is driven by the private sector and consumers and things that really are affected by elections, but not deterred by elections.

JULIE HYMAN: I mean, all of that said, it seems a rather unusual election in some ways, right? You've got one of the candidates who is under indictment on multiple fronts. You've got the other who there's concerns about his age. It's a lot more to it than that. Does it affect business decisions, I mean, on the part of Bank of America, for example? I mean, how do you even begin to gain some of that out?

BRIAN MOYNIHAN: Well, one of your colleagues asked me, do you have a draw for candidates X or candidate Y? I said that'd be a lot of draws because think about the changes in the UK, prime ministers, the changing in the French prime minister. We're affected by that. So when you run a company, as my colleagues do at Bank of America, the teammates that run it, and the companies around the world, you have to be ready for any scenario.

And so our job is not to predict elections. Our job is to be able to go no matter what the circumstances are in our country's elections, US elections or not. And I tell people, our company started in 1784, the earliest part. There's been a lot of elections. And so you have to have a way to operate the company for profits and purpose. You have to have a way to operate the company for the benefit of our customers, our teammates, and our shareholders, and society. Those are principles.

And so the elections will come and go. We try to help every administration on both parties with our best thinking. And some take it. Some don't take it. Some take it a little bit. And our job as the business community and as Bank of America is to help governments be successful because if they're successful, we're going to be successful.

BRIAN SOZZI: Another big bet you're making is on AI. You seem to be spending a large sum of money this year in modernizing the bank. How will AI change banking?

BRIAN MOYNIHAN: Well we have this capability called Erica. And so Erica was started about seven years ago. And it is effectively AI. It's a natural language processing engine. It's very straightforward compared to the autonomous language.

But it was same thing we had to go to somebody and get produce a language. We had to produce an environment on it, use our data. And it has 18 million consumers using, 170 million interfaces last quarter. So it's not like may this happen. It's happening. Each one of those would have bee a phone call, email, a text, or walk into the branch. And so it saves money. So that's just an example of how we're using it. So we completely believe that this will have a big impact.

The question is you've got to have your data right. And we have spent billions of dollars to get our data consistency throughout our organization. And we're not perfect. Then you have to have the ability to convert processes to the technique through algorithm models and language models and learning models. The trick in that is we have to have accountability. You have to be able to say if we made a decision to turn down a loan, well, how did we do it? Why did we do it? What were the factors? Because that's the law. Otherwise, it could be discriminatory.

And so in regulated industries, it's going to be a trickier application. Now, to help somebody do their work, which then they take it and do something, fine. It's much easier. Programming. We're already using in programming. It's saving money. Again, you got to have a psychological change. Your programmers have to learn how to use it and what they're going to do next versus what they did before. Great possibilities for us. I still think in early stages in terms of adoption, our company is. A lot of hype about it, a lot of discussion. You could go to 14 sessions here at Davos today on AI, I guarantee you on some topic.

But those of us that actually-- we put $3.8 billion in technology out. We have hundreds of hundreds of algorithm models have been operating in our company for years, years, and years. And so this is like a natural movement along a path. And we're already doing it. And we think it has great hope. But you've got to make sure you're moving right with the customer, right with the integrity of the operating systems and right with the regulatory framework.

JULIE HYMAN: And finally, I want to ask you about DEI a little bit because, as you know, there's been a backlash against diversity and inclusion programs. You're the council chair for global diversity and inclusion at Bank of America. So obviously you think it's important. So what do you make of the backlash? And how do you do it in the right way?

BRIAN MOYNIHAN: Well, these things ebb and flow. And they get talked about in ways that are not really about some of the topics that are involved. And so you get a lot about social policies and stuff like that. Look, we listen to our team. We have 200,000-plus teammates. We have 180,000-- we're in affinity groups. We have a strong D&I council that represents the company. We have subcouncils underneath it. And they just give us insight as to what they need.

And so we are continuously trying to improve our company to provide opportunity that anybody can come to our company, be who they are, and be as successful as they want to be. So last night, I was talking to a group around the military with honor, a group that Rye Barcott runs. And so we hired 17,000 veterans over the last few years. Yesterday, our teammate Eric Schimpf celebrated his 10th anniversary of the company.

10 years ago, he started with a company out of the military. West Point. Military. Came back. Leaves military on a Friday. Starts on a Monday. He's a receptionist for a day. 10 years later, he's running Merrill Lynch. And that's because he had talent. And he did. But he had never worked in the private sector. So whether it's teammates coming to the military, whether it's teammates coming from a Title I high schools into our operating platforms, call centers-- that's why we start at $23 an hour. So they can invest in their career. Whether it's the teammates who have worked with for 50, 60 years, we're providing opportunity.

And so D&I is core to how do we do that. So we will do what we do. And we're mindful of the atmosphere around us. But we are committed to having a place where everybody can be successful. Male, female, all different ethnicities. And then we have to help our teammates through tough times. And that's like with Hamas' attack on Israel, we had a lot of Jewish teammates that we had to go in and support. We had teammates affected by the Ukraine situation. We have teammates affected by all things going on.

And so we're against hate speech. We've been supporting the foundation combating anti-Semitism, which has a broader purview now and trying to help-- we're trying to educate teammates on how to have the dialogue in the company. But it's what our teammates want. It's what's good for the company. It's part of who we are. And we continue to do it. And at the fringes, we'll get advice from a lot of people about what's right and wrong. But we run the company the way we run the company.

BRIAN SOZZI: We have to leave it there. Bank of America CEO Brian Moynihan, thanks for always giving us time here. A very cold-- no jacket again for the second time this year.

BRIAN MOYNIHAN: It's balmy out today. It must be--

BRIAN SOZZI: Yeah. Balmy. All right. Brian, so good to see you. We'll talk to you soon.

BRIAN MOYNIHAN: Thank you.