Morgan Stanley CEO Ted Pick highlighted the shift away from loose monetary policy and zero interest rates during a financial CEO panel in Riyadh. He declared that the era of financial repression, zero interest rates, and zero inflation has ended, paving the way for higher interest rates and global challenges. Pick emphasized that geopolitical tensions are resurfacing and will continue to pose challenges for decades.
Pick referenced Francis Fukuyama's 1992 book, "The End of History and the Last Man," as a parallel to the current economic environment following the end of the Cold War, where conflicts among states and ideologies were considered to be resolved. Since 2022, repressive interest rates and lenient monetary policies have been in retreat. The Federal Reserve had previously lowered rates close to zero in response to the pandemic but raised the benchmark rate by about 500 basis points across 18 months.
Discussing challenges faced by public companies, Pick noted the stark contrast between the pandemic-induced economic surge and the subsequent tough period over the past 18 months. During the Future Investment Initiative in Saudi Arabia, he stated that the current environment feels more stable and typical.
Notably, in September, the Federal Reserve cut interest rates by 50 basis points, marking its first rate reduction since March 2020, reflecting a shift in its management of the U.S. economy and inflation outlook. Strategists from JPMorgan and Fitch Ratings predict two further rate cuts by the end of 2024, continuing into 2025. However, numerous Wall Street CEOs disagree, citing expectations of persistent inflation.
At an international financial institutions meeting earlier, CEOs from companies including Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street were asked if they foresee the Fed making two more rate cuts this year. None of the panelists raised their hands, indicating their skepticism.
