Morgan Stanley CEO Gorman says Fed may need raise interest rates soon

Morgan Stanley CEO Gorman says Fed may need raise interest rates soon

With economic growth currently strong, the Federal Reserve should raise interest rates soon to combat a future downturn, Morgan Stanley CEO James Gorman said Monday.

Speaking a day before the central bank begins its two-day policy meeting, the head of the Wall Street powerhouse said he in fact expects policymakers this week to telegraph monetary tightening in 2022.

Morgan Stanley CEO Gorman says Fed may need raise interest rates soon

Morgan Stanley CEO Gorman says Fed may need raise interest rates soon

“We are heading toward a rising interest rate environment,” Gorman told CNBC’s Wilfred Frost during an interview on “Closing Bell.” “I felt the Federal Reserve would be better off storing away some of the rate increases, so when the inevitable downturn comes, you’ve got some ammunition to fight with.”

The Fed had been willing to allow inflation to run hot until employment had fully recovered. However, with consumer prices at their highest levels in nearly 40 years, officials have said they are ready to pull back on some of the ultra-easy measures put in place during the Covid crisis.

“We’re moving into an environment where interest rates are rising, I think it would be right for the Fed to raise rates so that when the inevitable fall happens, the Fed has an arsenal to deal with it,” Gorman told CNBC.The Fed allowed inflation to rise so that the job market could fully recover. However, with consumer prices rising to a 40-year high, authorities announced that they were ready to withdraw the ultra-loose monetary policies introduced during the pandemic period. The Fed is expected to double its monthly asset purchase reduction program to $30 billion at this meeting.

This may bring the Fed’s interest rate hike to the agenda as of March 2022. The first rate hike in the markets is expected in May.

Gorman commented, “If I were the Fed, I would start a rate hike as soon as possible.” Gorman stated that interest rate hikes will provide stability to the economy, although it will shake the market for a short time.

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