Morgan Stanley President and Chief Operating Officer Daniel Pinto warned on Thursday that due to high inflation rates, the Federal Reserve may not cut interest rates at all this year.
He said at an event in Washington, "They (the Federal Reserve) may need more time to lower interest rates."
In addition, Pinto believes that the possibility of raising interest rates is "very, very low" in a situation where there is widespread suspicion that inflation will ease soon. He said the Federal Reserve is not in a hurry because premature interest rate cuts would be "painful" and could lead to an economic recession.
Recent economic data shows that inflation in the United States is still more stubborn than many had anticipated earlier this year, making the likelihood of the Federal Reserve cutting interest rates quickly seem smaller. This also makes the recent "hawk sounds" within the Federal Reserve seem not surprising.
Firstly, Federal Reserve Chairman Powell hinted on Tuesday that interest rates may remain at a higher level for a longer period of time. He stated that the US economy has shown strong performance in most aspects, except that inflation has not yet returned to the central bank's target. Given this, it is unlikely that the Federal Reserve will cut interest rates soon.
Powell mentioned that the Federal Reserve's preferred inflation indicator, the personal consumption expenditure (PCE) price index, had an annual rate of 2.8% in February. "This clearly does not give us more confidence, on the contrary, it indicates that obtaining this confidence may take longer than expected."
In addition, Federal Reserve Vice Chairman Philip Jefferson also stated that if US inflation does not slow down as expected, the Federal Reserve will be prepared to maintain a tight monetary policy unchanged. Cleveland Fed Chairman Mester emphasized that interest rate cuts are not urgent unless the Fed gains sufficient confidence.
On Thursday, Federal Reserve officials once again released the "three eagles": "three leaders" Williams once again expressed the view to the public that "there is no rush to cut interest rates yet"; Atlanta Fed President Bostek reiterated the view of "one rate cut within the year" and stated that his view on the possible timing of the first rate cut is "the end of this year", and expressed "I am willing to maintain patience"; The view of "Eagle King" Kashkari is even more radical, as he directly stood in line to "not cut interest rates" within the year.
No wonder Wall Street and the market have compromised one after another. The CME Federal Reserve observation tool shows that the general expectation has increased from 3 times to 2 times, and the first drop has been postponed from June to September. Even now, the focus of Wall Street's attention is no longer on postponing interest rate cuts until a few months, but on whether it will continue to be cut this year.
Bank of America analyst Stephen Juneau has previously stated that the Fed will not cut interest rates until March 2025 at the earliest, which is a "real risk", although they still predict that the Fed will cut rates in December, the only time this year.
Pinto's latest comments also echo the views of JPMorgan Chase CEO Jamie Damon. In a letter to shareholders earlier this month, Damon wrote that sustained inflationary pressure may lead to interest rates exceeding market expectations, and his company is prepared to accept interest rates of 2% to 8%, "or even higher.".