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Top Wall Street execs are getting skeptical on the Fed’s easing path

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A trader works as a screen displays the Fed rate announcement, on the floor of the New York Stock Exchange on June 12, 2024.

Brendan McDermid | Reuters

RIYADH, Saudi Arabia — Major Wall Street CEOs see ongoing inflation pressures in the U.S. economy and aren’t convinced that the Federal Reserve will continue its rate-easing path with a further two reductions this year.

The Fed cut its benchmark rate by 50 basis points in September, indicating a turning point in its management of the U.S. economy and in its outlook for inflation. In late-September reports, strategists at J.P. Morgan and Fitch Ratings had predicted two additional interest rate trims by the end of 2024 and expect such reductions to continue into 2025.

The CME Group’s FedWatch tool puts the probability of a 25-basis-point cut at this week’s November meeting at 98%. The current probability of the benchmark rate being taken down by another 25 basis points at the December meeting is 78%.

But some CEOs appear skeptical. Speaking last week at Saudi Arabia’s showcase economic conference, the Future Investment Initiative, they see more inflation on the horizon for the U.S., as the nation’s economic activity and both presidential candidates’ policies involve developments that will potentially be inflationary and stimulatory — such as public spending, the onshoring of manufacturing, and tariffs.

Big bank CEOs reflect on the election and inflation

A group of CEOs speaking at an FII panel moderated by CNBC’s Sara Eisen — which included Wall Street hegemons such as the bosses of Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered and State Street — were asked to raise their hand if they thought two additional rate cuts would be implemented by the Fed this year.

No one put their hand up.

“I think inflation is stickier, honestly, you look at the kind of jobs report and the wage reports in the U.S., I think it’s going to be hard for inflation to come down to the 2% level,” Jenny Johnson, Franklin Templeton president and CEO, told CNBC in an interview on Wednesday, saying she thinks only one further interest rate cut will take place this year.

“Remember a year ago, we were all here talking about recession? Was there going to be [one]? Nobody’s talking about recession anymore,” she said.

Larry Fink, whose mammoth BlackRock fund oversees over $10 trillion in assets, also sees one rate reduction before 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 we have greater embedded inflation in the world than we’ve ever seen,” Fink said at another FII panel last week.

“We have government and policy that is much more inflationary. Immigration — our policies of onshoring, all of this — no one is asking the question ‘at what cost.’ Historically we were, I would say, a more consumer-driven economy, the cheapest products were the best and the most progressive way of politicking,” he noted. 

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America’s consumer price index, a key inflation gauge, was up 2.4% in September compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics. That figure is a tick down from the 2.5% print of August, implying a slowdown in price growth. The September reading was also the smallest annual one since February 2021.

On Friday, new data showed U.S. job creation in October slowed to its weakest pace since late 2020. Markets largely ignored the bad news, as the nonfarm payrolls report flagged acute climate and labor disruptions.

Goldman Sachs CEO David Solomon said inflation will more embedded into the global economy than what market participants are currently predicting, meaning price rises could prove to be stickier than the consensus.

“That doesn’t mean that it’s going to rear its head in a particularly ugly way, but I do think there’s the potential, depending on policy actions that are taken, that it can be more of a headwind than the current market consensus,” he said.

Morgan Stanley CEO Ted Pick went even further, declaring last Tuesday that the days of easy money and zero-interest rates are firmly in the past.

“The end of financial repression, of zero interest rates and zero inflation, that era is over. Interest rates will be higher, will be challenged around the world. And the end of ‘the end of history’ — geopolitics are back and will be part of the challenge for decades to come,” Pick said, referencing the famous 1992 Francis Fukuyama book, “The End of History and the Last Man,” which argued that conflicts between nations and ideologies were a thing of the past with the ending of the Cold War.

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Speaking on Sara Eisen’s panel Tuesday, Apollo Global CEO Marc Rowan even questioned why the Fed was cutting rates at a time when so much fiscal stimulus had propped up a healthy-looking U.S. economy. He noted the U.S. Inflation Reduction Act and the CHIPS and Science Act and an increase in defense production.

“We’re all talking about, in the U.S., of shades of good. We really are talking about shades of good. And to come back to your point on rates, we massively increased rates, and yet, [the] stock market [is] at a record high, no unemployment, capital market issuance at will, and we’re stimulating the economy?,” he said.

“I’m trying to remember why we’re cutting rates, other than to try and equalize the bottom quartile,” he later added.

Economics

Trump tariffs could cause summer economic slump: Chicago Fed president

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Austan Goolsbee, President and CEO of the Federal Reserve Bank of Chicago, speaks to the Economic Club of New York in New York City, U.S., April 10, 2025. 

Brendan McDermid | Reuters

Business owners and CEOs are already stocking up on inventory, and some American shoppers are panic buying big-ticket items in anticipation of President Donald Trump’s tariffs. The sudden buying binge could cause an “artificially high” level of economic activity, said Federal Reserve Bank of Chicago President Austan Goolsbee.

“That kind of preemptive purchasing is probably even more pronounced on the business side,” Goolsbee told CBS’ “Face The Nation” on Sunday, adding: “We heard a lot about preemptive building-up of inventories that could last 60 days, 90 days, if there [was] going to be more uncertainty.”

Businesses stockpiling inventory and consumers accelerating their purchasing decisions — buying an Apple iPhone now, say, rather than waiting until the fall — may inflate U.S. economic activity in April and lead to a slowdown in the coming months, Goolsbee suggested.

“Activity might look artificially high in the initial, and then by the summer, might fall off — because people have bought it all,” he said.

Sectors affected by Trump’s tariffs, particularly the auto industry, are most likely to heavily stock up on inventory now before import levies on goods from other countries potentially rise further, said Goolsbee. Many car parts, electronic components and other big-ticket consumer items are manufactured in China, for example, which currently faces a 145% total tariff rate on goods imported to the United States.

Trump’s tariffs on a bevy of other countries are currently in the middle of a 90-day pause, with a 10% baseline tariff rate instead applying to all imported goods across the board. The pause is due to expire on July 9, with Trump touting a series of rate negotiations with foreign leaders between now and then.

“We don’t know, 90 days from now, when they’ve revisited the tariffs, we don’t know how big they’re going to be,” Goolsbee said.

Some U.S. business owners who buy goods manufactured in China say they already can’t afford to place rush orders on inventory. Matt Rollens, owner and CEO of Granite Bay, California-based novelty drinkware company Dragon Glassware, says he’s temporarily holding his products in China because paying the 145% levy would force him to raise consumer prices by at least 50%, likely drying up customer demand.

Rollens has enough inventory in the U.S. to last roughly until June, and hopes the tariffs will be rolled back by then, he told CNBC Make It on April 11.

Short-term uncertainty and financial pain aside, the Fed’s Goolsbee expressed optimism about the country’s longer-term economic outlook.

“If we can get through this, it’s important to remember: The hard data coming into April was pretty good. The unemployment rate [was] around steady full employment, inflation [was] coming down,” he said. “It’s just a desire of people expressing they don’t want to back to ’21 and ’22, at a time when inflation was really raging out of control.”

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Economics

Donald Trump wants a certain kind of immigrant: the uber-rich

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IN HIS LOVE of lucre Donald Trump can be crass. In their pursuit of efficiency, free marketeers can be, too. Consider the sale of citizenship. Most people dislike the idea of treating national belonging as a commodity. Yet about a dozen countries hawk passports and more than 60, including America, offer residency in exchange for an investment or donation. Its “golden-visa” scheme is cumbersome, under-priced and inefficient. On this point the president and the market agree.

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Economics

Checks and Balance newsletter: The Democrats’ future is up for grabs

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Checks and Balance newsletter: The Democrats’ future is up for grabs

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