Morgan Stanley CEO "US to Raise Base Interest Rate Early Next Year"
[Asia Economy Reporter Byunghee Park] James Gorman, CEO of Morgan Stanley, predicted that the U.S. benchmark interest rate hike will begin in early next year.
CEO Gorman made this remark while attending the Japan Nikkei Financial Conference held online. Bloomberg reported that Gorman’s expected timing for the U.S. benchmark interest rate hike is earlier than that of the Morgan Stanley U.S. economic analysis team led by economist Ellen Gentry.
CEO Gorman said, "My personal view is that the Federal Reserve (Fed) will likely raise the benchmark interest rate in early next year, earlier than the 2023 forecast." He added, "The Fed will move based on any of several economic indicators," implying that there are multiple factors that could prompt the Fed’s tightening measures.
The Gentry team currently expects the Fed to reduce quantitative easing starting in April next year and to raise the benchmark interest rate only after the third quarter of 2023. CEO Gorman anticipated the quantitative easing reduction to begin by the end of this year and the interest rate hike to occur in early next year. He emphasized that he was merely expressing his personal views several times.
Bloomberg noted that Gorman and the Gentry team had differing views in 2015 as well. In early 2015, Gorman expected the Fed to raise interest rates within the year, while Gentry’s team forecasted a hike in 2016. When the Fed raised the benchmark interest rate in December 2015, Bloomberg reported that Gorman’s prediction was correct.
Recently, U.S. inflation has increased the likelihood of Fed tightening. The U.S. Consumer Price Index (CPI) for April rose 4.2% year-over-year, marking the highest increase since 2008. However, the Fed’s stance is that inflationary pressures are temporary.
CEO Gorman expressed an opposing view. He said, "More people are beginning to believe that inflationary pressures could be structural and long-term," adding, "If this view is correct, the Fed will eventually have to raise the benchmark interest rate at some point." Gorman noted that although we have not seen inflation for several years, prices are rising and attracting attention. He also expressed strong confidence in the U.S. economic recovery, stating that conditions for consumers and businesses are improving.
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Regarding Japan, Gorman advised that the country should accept more immigration to increase its economic growth rate.
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