Top Wall Street CEOs express doubts about the Federal Reserve’s commitment to a rate-easing trajectory, as ongoing inflation pressures persist in the U.S. economy. Despite the Fed’s 50 basis point reduction in September, marking a strategic shift in its economic management and inflation outlook, there is growing skepticism among top CEOs regarding additional cuts this year.
In late September, strategists from JPMorgan and Fitch Ratings projected two more interest rate cuts by the end of 2024, with expectations for further reductions extending into 2025. The CME Group’s FedWatch tool currently assigns a 98% probability to a 25 basis point cut at the November meeting, and a 78% chance at the December meeting.
However, at the recent Future Investment Initiative economic conference in Saudi Arabia, several CEOs, including leaders from Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street, revealed their reservations. When asked in a CNBC-moderated panel who anticipated two additional Fed rate cuts this year, none raised their hands.
Goldman Sachs CEO David Solomon emphasized that inflation might be more ingrained in the global economy than market forecasts suggest, implying that price increases could be more persistent.
On the other hand, Morgan Stanley CEO Ted Pick asserted that the era of easy money and zero interest rates is definitely over.
Meanwhile, some projected further inflationary pressures in the U.S. economy, stemming from ongoing economic activities and policies proposed by both presidential candidates, which include public spending, onshoring of manufacturing, and tariffs — all of which could lead to inflationary and stimulatory effects.
