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.
“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.
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.