Key executives on Wall Street express skepticism about the Federal Reserve continuing its path of monetary easing, particularly the expectation of two additional rate cuts this year. Recent Fed actions, such as the 50 basis point cut in September, highlight a shift in economic management and inflation outlook. JPMorgan and Fitch Ratings strategists predict two more rate cuts by the end of 2024, potentially extending into 2025, as indicated by CME's FedWatch tool, which forecasts a high probability of rate cuts in upcoming Fed meetings.
Despite these projections, CEOs at a recent Future Investment Initiative in Saudi Arabia expressed concerns that U.S. economic activity and policy decisions, including increased public spending and tariffs, may fuel further inflation. Notably, during a CNBC-hosted panel featuring leaders from Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street Bank, no executives supported the notion of two more rate cuts this year.
Franklin Templeton CEO Jenny Johnson contends that inflation remains persistent, making it challenging for rates to fall to desired levels. BlackRock's Larry Fink also predicts just one more rate cut by the end of 2024, emphasizing the global challenge of latent inflation. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index rose 2.4% year-over-year in September, indicating a slowdown in price increases.
Recent data shows a deceleration in U.S. job growth, affected by external factors like hurricanes and strikes, yet largely disregarded by markets. Goldman Sachs CEO David Solomon anticipates deeper entrenchment of inflation in the global economy, posing greater challenges than current market assumptions suggest.
Morgan Stanley CEO Ted Pick insists that the era of easy money and zero interest rates is over, predicting higher rates and global challenges, alongside geopolitical tensions becoming a significant factor in the coming decades.
Marc Rowan of Apollo Global questions the necessity of Fed rate cuts amid substantial fiscal stimulus, citing the U.S. Inflation Reduction Act, the CHIPS and Science Act, and increased defense production.
