On June 12, 2024, in the trading floor of the New York Stock Exchange, a trader displayed the Federal Reserve interest rate announcement on the screen.
Brendan McDermid | Reuters
RIYADH, Saudi Arabia — Leading Wall Street CEOs see persistent inflationary pressures in the U.S. economy and are unconvinced the Federal Reserve will continue its easing policy with two more rate cuts this year.
The Federal Reserve cut its benchmark interest rate by 50 basis points in September, marking a turning point in its management of the U.S. economy and its outlook for inflation. In a late-September report, strategists JPMorgan Chase and Fitch Ratings Two more rate cuts are expected by the end of 2024, with such cuts expected to continue into 2025.
CME Group’s Fed Watch Tool The probability of a 25 basis point rate cut at this week’s November meeting is expected to be 98%. The current probability of the benchmark interest rate being cut by another 25 basis points at the December meeting is 78%.
But some CEOs seem skeptical. Speaking at the Future Investment Initiative, an economic showcase conference in Saudi Arabia last week, they argued that more inflation is on the horizon in the United States as the country’s economic activity and the policies of both presidential candidates address potential inflation and stimulus. Development – such as public policy spending, manufacturing outsourcing and tariffs.
Speaking on an FII panel moderated by CNBC reporter Sara Eisen, a group of CEOs, including bosses of Wall Street heavyweights such as Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered and State Street, were Asked for a show of hands if they thought there were two more rate cuts the Fed would implement this year.
No one raised their hands.
“To be honest, I think inflation is more sticky, and you look at the jobs report and the wage report in the U.S. and I think it’s going to be very difficult for inflation to get down to the 2% level,” said Jenny Johnson, president of Franklin Templeton. The executive and CEO told CNBC on Wednesday that she sees only one further rate cut this year.
“Remember a year ago, we were all here talking about a recession? Is there going to be (one)? No one talks about a recession anymore,” she said.
Larry Fink, whose massive BlackRock fund manages more than $10 trillion in assets, also predicts a rate cut by the end of 2024.
“I think it’s fair to say we’re going to have at least a 25 basis point cut, but that being said, I do believe there’s more built-in inflation in the world than we’ve ever seen,” Fink said in another post last week. said on the FII panel.
“We have a much higher inflation rate of government and policies. Immigration – our native policies, all of this – no one is asking the ‘at what cost’ question. I would say, historically, we are a A more consumer-driven economy where the cheapest products are the best and most progressive approach to politics,” he noted.
American consumer price indexone Key Inflation Indicatorswas Up 2.4% in September Compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics. The figure was down from 2.5% in August, implying slower price growth. September’s reading was also the smallest annual reading since February 2021.
On Friday, new data showed U.S. job growth slows in October Growth fell to its lowest level since late 2020. Markets largely ignored the bad news as the non-farm payrolls report showed serious climate and labor disruption concerns.
Goldman Sachs CEO David Solomon said inflation will be more deeply integrated into the global economy than market participants currently predict, meaning price increases may be stickier than consensus.
“That doesn’t mean it’s going to rear its head in a particularly ugly way, but I do think it has the potential to be more of a headwind than the current market consensus, depending on the policy actions that are taken,” he said.
Morgan Stanley CEO Ted Pick went further, declaring last Tuesday that the days of easy money and zero interest rates were behind him.
“The end of financial repression, zero interest rates and zero inflation, that era is over. Interest rates will be higher and will be challenged around the world. And the end of the ‘end of history’ – geopolitics is back and will be history “The End of History and the Last Man,” Peake said, citing Francis Fukuyama’s famous 1992 book “The End of History and the Last Man,” which argued that With the end of history, conflicts between states and ideologies have become a thing of the past. cold war.
Speaking on the Eisen panel on Tuesday, Apollo Global CEO Mark Rowan even questioned why the Fed was cutting interest rates when so much fiscal stimulus is propping up a seemingly healthy U.S. economy. He cited the U.S. Inflation Lowering Act, the CHIP and Science Act, and increases in defense production.
“In the United States, we are all talking about good things. We are indeed talking about good things. Going back to your point about interest rates, we raised them significantly, and yet, the stock market (is) at an all-time high, no unemployment, capital markets are at will issue, are we stimulating the economy?” he said.
“I’m trying to remember why we’re cutting rates, rather than trying to balance the bottom quartile,” he later added.
