Top Wall Street executives are growing skeptical of the Fed’s easing policy.

RIYADH, Saudi Arabia — Leading Wall Street CEOs see continued inflationary pressures in the U.S. economy and are not convinced the Federal Reserve will continue its rate-cutting trajectory with two more rate cuts this year.

The Fed cut interest rates by 50 basis points in September, marking a turning point in its management of the U.S. economy and the outlook for inflation. In a report in late September, strategists at JPMorgan and Fitch Ratings said they expected two more rate cuts by the end of 2024, and expected these cuts to last through 2025. .

According to CME Group’s FedWatch tool, there is a 98% chance of a 25 basis point (bp) rate cut at this week’s November meeting. There is currently a 78% chance that the benchmark interest rate will be cut by another 25 basis points at the December meeting.

But some CEOs seem skeptical. Speaking last week at the Future Investment Initiative, Saudi Arabia’s flagship economic conference, they said the country’s economic performance and the policies of both presidential candidates include developments that could potentially be inflationary and stimulative. As a result, we expect further inflation to occur in the United States. These include spending, domestication of manufacturing, and tariffs.

The group of CEOs who spoke on the FII panel moderated by CNBC’s Sarah Eisen included Wall Street powerhouses, including executives from Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered and State Street. included, but were asked to raise their hand if they thought there were two more. The Fed will cut interest rates this year.

No one raised their hand.

“I think inflation is going to be more robust,” said Jenny Johnson, president of Franklin Templeton. “Honestly, when you look at the U.S. employment and wage statistics, it’s hard to see inflation coming down to 2%. I think so,” he said. The CEO said in an interview on CNBC on Wednesday that he believes there will only be one further rate cut this year.

“Remember a year ago? Were we here talking about a recession? Was there going to be a recession? Nobody’s talking about a recession anymore.” she said.

Larry Fink, who heads the giant BlackRock fund that manages more than $10 trillion in assets, also expects one interest rate cut by the end of 2024.

“I think it’s fair to say we’re going to do at least a 25 (basis point cut), but having said that, I think there’s more inflation embedded in the world than we’ve ever seen,” Fink said. I believe that.” He said this at another FII panel last week.

“Our government and our policies are much more inflationary. Immigration, home base policies, all of this, no one asks the question, ‘What does it cost?'” Historically, we “It was a more consumer-driven economy, where the cheapest product was the best and most progressive political approach,” he said.

The U.S. Consumer Price Index, a key inflation measure, rose 2.4% in September compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics. This figure is down slightly from August’s 2.5%, suggesting a slowdown in price growth. The September measurement was also the lowest annual measurement since February 2021.

On Friday, new statistics showed that U.S. job creation slowed in October to the weakest pace since late 2020. Markets largely ignored the bad news, as nonfarm payrolls reports warned of severe climate and labor disruptions.

Goldman Sachs CEO David Solomon said inflation will become more deeply entrenched in the global economy than market participants currently expect, meaning price increases could be stronger than consensus. said.

“That doesn’t mean it’s going to rebel in a particularly ugly way, but I think depending on the policy measures that are taken, it could be more of a headwind than the current market consensus,” he said.

Morgan Stanley CEO Ted Pick went further last Tuesday, declaring that the days of easy monetary policy and zero interest rates are completely behind us.

“The end of financial repression, zero interest rates, zero inflation, those days are over. Interest rates will get even higher and will be challenged all over the world. And the end of the ‘end of history,’ geopolitics is back and coming. This is part of the challenge for decades to come,” Pick said, citing Francis Fukuyama’s famous 1992 book, The End of History and the Last Man. He argued that conflicts and conflicts between ideologies were a thing of the past. Cold War.

On Tuesday’s Eisen panel discussion, Apollo Global CEO Mark Rowan asked why the Fed is cutting interest rates when so much fiscal stimulus is supporting a seemingly healthy U.S. economy. I even had doubts about whether I would do it. He cited the US Inflation Control Act, CHIPS and Science Act, and increased defense production.

“In the United States, we’re all talking about shades of good. We’re actually talking about shades of good. Going back to your point about interest rates, we’ve had significant interest rate hikes, but stocks still Markets (are) at record highs, unemployment at zero, capital markets free to issue and stimulating the economy?” he said.

He later added: “I’m trying to remember why we’re cutting rates other than to equalize the bottom quartile.”