RIYADH, Saudi Arabia — Major Wall Street CEOs anticipate persistent inflation pressures in the U.S. economy and are uncertain about the Federal Reserve’s future rate-cutting trajectory, which may not include two more reductions this year.
The Fed reduced its benchmark rate by 50 basis points in September, signaling a shift in its management of the U.S. economy and its inflation outlook. Reports from JPMorgan and Fitch Ratings in late September had forecasted two additional interest rate cuts by the end of 2024, with expectations for further reductions into 2025.
The CME Group’s FedWatch tool indicates a 98% probability of a 25 basis point cut at the November meeting this week. The current likelihood of another 25 basis point reduction at the December meeting stands at 78%.
However, some CEOs express doubt. At Saudi Arabia’s Future Investment Initiative conference last week, CEOs highlighted potential inflationary trends in the U.S. due to economic activities and policies of both presidential candidates, such as public spending, onshoring of manufacturing, and tariffs.
During an FII panel moderated by CNBC’s Sara Eisen, CEOs from Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street were asked if they believed the Fed would implement two more rate cuts this year. None raised their hand.
Jenny Johnson, President and CEO of Franklin Templeton, stated in an interview with CNBC that she expects only one more interest rate cut this year, citing concerns about sticky inflation levels. Larry Fink of BlackRock also anticipates a single rate reduction by the end of 2024, emphasizing increased embedded inflation globally.
The U.S. consumer price index rose by 2.4% in September compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics. This figure represents a slight decrease from August’s 2.5%, indicating a slowdown in price growth.
Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick expressed concerns about potential inflationary pressures and the end of an era of easy money and zero interest rates. Pick emphasized that geopolitical challenges would persist for decades to come.
Apollo Global CEO Marc Rowan questioned the Fed’s rate cuts amid significant fiscal stimulus supporting the U.S. economy. He highlighted various legislative acts and increased defense production contributing to the economy’s strength, questioning the rationale behind further rate cuts.
