Bank of America CEO: The Federal Reserve faces significant risks and should cut interest rates as soon as possible!

This week, the United States, as the world's largest economy, will face its most severe test of the year, namely whether the Federal Reserve can achieve the so-called soft landing, as investors anxiously await a series of key inflation and growth data releases following a historic surge in market volatility.

Last week's market turmoil included a record surge in the closely watched volatility index (VIX), followed by the largest drop in four days in history. This has made investors particularly cautious in the last week of August, fearing that the U.S. economy may be heading towards a recession.

Labor market data is mixed, but still shows steady growth. Weak consumer spending, reduced activity, and declining confidence indices have raised concerns.

This will test the Federal Reserve's ability to achieve the so-called soft landing, returning the inflation rate to a stable level of around 2% without plunging the economy into a recession.

Brian Moynihan, CEO of Bank of America, discussed this risk in an interview, suggesting that with the economic slowdown and consumer spending tightening, the Fed should cut rates sooner rather than later.

He said, "The economy is slowing down, so we have to be careful because we have already succeeded in suppressing inflation, which has already fallen. Although it has not fallen to the level people hoped for, we must be careful not to try to be too perfect to the point of leading us into a recession."

The executive stated that analysts at Bank of America do not predict a recession this year.

Moynihan added, "They tell people that rates may not rise, but if they don't start cutting rates relatively quickly, it could hit consumer confidence in the U.S."

The July Consumer Price Index report released on Wednesday will largely determine the Fed's next move. While the market has already bet on a rate cut in September, there is still debate within the central bank on whether to opt for a conservative 25 basis point cut or a larger 50 basis point cut.

Chris Larkin, Director of Trading and Investment Management at E-Trade, a subsidiary of Morgan Stanley, said, "This week's inflation data is a critical moment for the stock market, which has just experienced its most volatile week of the year. In just a few weeks, the discussion has shifted from whether the economy has slowed enough to concerns that the economy may be stagnating."

He added, "Investors want to see data fall into a 'sweet spot,' where the data is 'cool' enough to ensure that the possibility of a rate cut in September is not questioned, but also 'warm' enough to dispel the recent recession concerns that have plagued the market."

Analysts expect the July CPI to increase by 0.2% month-on-month and 3.2% year-on-year, remaining unchanged from the previous month but still well above the Fed's 2% target