Anamika Dey, editor
Brief news
- Goldman Sachs CFO believes the U.S. economy is nearing a gentle landing due to a 50 basis point interest rate cut by the Federal Reserve.
- Analysts express concerns about the effectiveness of significant rate reductions, recalling past recessions.
- JPMorgan’s CEO emphasizes cautious optimism, noting market expectations may be overly optimistic despite decreasing inflation and manageable unemployment.
Detailed news
According to the chief financial officer of Goldman Sachs, the U.S. economy is on the brink of a gentle landing as a result of the Federal Reserve’s decision to reduce interest rates by 50 basis points.
His comments are made in response to market participants’ concerns regarding the timing of the U.S. central bank’s jumbo rate reduction, which is intended to reduce inflation without causing a recession.
Some analysts have expressed apprehension regarding the U.S. economy’s future, cautioning that comparable exorbitant rate reductions were unable to prevent the recessions of the early 2000s and the global financial crisis.
On Wednesday, the Federal Open Market Committee, which is responsible for setting interest rates, voted to decrease its benchmark overnight borrowing rate by half a percentage point, or 50 basis points, to a target range of 4.75% to 5%. This decision was unexpected by a number of economists. A basis point is equivalent to 0.01%.
It was the first time the FOMC had reduced its rate by that much since the early stages of the coronavirus pandemic and, prior to that, the global financial crisis of 2008.
“I believe that the initial 50 basis point reduction serves as a clear indication of the new course.” “And hopefully, that will unlock incremental amounts of confidence, which should obviously reduce the cost of capital, and perhaps for some more strategic activity heading into the end of the year,” Denis Coleman, chief financial officer at Goldman Sachs, told CNBC’s Annette Weisbach on Tuesday.
“He expressed optimism that the market will experience increased activity and improved backlogs as we transition into 2025.”
When asked whether the Fed’s rate reduction may have ensured a gentle landing for the U.S. economy, Coleman expressed his optimism and anticipation that this would be the case.
Coleman stated, “At present, that is the general consensus.” “Managing economies during periods of transition is consistently a challenging endeavor.” However, inflation levels are decreasing, unemployment is manageable, and they are beginning to implement rate cuts and maintain a soft-landing trajectory.
Dimon: “Let me be on the cautious side.”
There is a lack of consensus regarding the sustainability of the U.S. economy in the months ahead.
“I am a long-term optimist.” Jamie Dimon, CEO of JPMorgan Chase, asserted, “In the short term, I am somewhat more skeptic than others.”
“Markets are pricing items as though they are going to be exceptional.” “Put me on the cautious side of that one,” he concluded.
Source : CNBC News
