Wells Fargo CEO: ‘Rates Are Going Up, It Couldn’t Be Clearer’

Charles Scharf, CEO of Wells Fargo speaks at the 2021 Milken Institute Global Conference in Beverly Hills, Calif., on Oct. 18, 2021. David Swanson/Reuters

Wells Fargo CEO Charles Scharf revealed that Americans and the U.S. economy aren’t ready for Federal Reserve interest rate hikes after the central bank raised rates earlier this month.

“We know rates are going up, it couldn’t be clearer,” Scharf told CNBC on Wednesday. “We know that consumers and businesses, while strong today, are going to see deterioration, and we’re going to act surprised when it happens.”

He added, that “doesn’t mean the world is coming to an end” and said, “we should do our best to recognize that and focus on what the solutions are.”

Federal Reserve policymakers on Tuesday promised further rapid interest-rate hikes to bring down high inflation, but they pushed back against growing fears among investors and economists that sharply higher borrowing costs will trigger a steep downturn.

“Many are worried that the Fed might be acting too aggressively and maybe tip the economy into recession,” San Francisco Fed President Mary Daly said in an interview on LinkedIn. “I am myself worried that left unbridled, inflation would be a major constraint and threat to the U.S economy and continued expansion.”

As a result, Daly said the Fed is “tapping the brakes” by raising interest rates to cool demand.

But Scharf said that he believes that “I would bet on more significant rate hikes” in the near future, adding that the central bank has been “very clear about how they’re going to think about what the right movements are going to be.”

“They’ve done as they started this what they said they were going to do, and they’ve been very clear that they intend for it to continue,” the CEO continued to say in the CNBC interview.

More to Come?

Federal Reserve Chair Jerome Powell told Congress on June 22 that inflation is still too high and needs to be brought down. In May, the Consumer Price Index increased 8.6 percent compared to the previous year, representing a 0.3 percentage point increase from April when the year-over-year index increased 8.3 percent.

Powell asserted that he wants to see interest rates drop to 2 percent and “anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”

In another interview several weeks ago, Scharf said there is “no question” the U.S. economy will hit a downward slump and signaled that a recession is in the works.

“It’s going to be hard to avoid some kind of recession,” he told the Wall Street Journal. “We live in this strange world where there’s still this extraordinarily underlying strength in terms of what we see, but you know that it’s going to deteriorate,” said Scharf.

Reuters contributed to this report.