Morgan Stanley CEO James Gorman said two changes have happened recently that “really matter” for the economy. The executive explained that inflation had clearly peaked and China had made a “major pivot” economically.
Morgan Stanley CEO on the US economy and inflation
Global investment bank Morgan Stanley Chairman and CEO James Gorman discussed the U.S. economy and China’s relationship with the United States in an interview with CNBC on Thursday in Davos, Switzerland.
“Two things have changed recently that really matter,” he began, noting that the first relates to inflation while the second relates to China’s recent economic pivot.
“Inflation numbers are better,” the Morgan Stanley chief said, noting:
Clearly, inflation has peaked. It is no longer a question. That’s a fact.
He added that the question is whether the Federal Reserve can hit its 2% inflation target and “how hard are they going to try to hit 2% from 2019.” stabilizing around 3%, 4%.”
Regarding the Fed’s interest rate hike, Gorman pointed out, “We were on a 75 basis point trajectory. Then we quickly moved to 50.” At the next meeting of the Federal Open Market Committee (FOMC) , he expects the Fed to hike rates by 25 basis points, saying, “I could see them doing 25, followed by 25, followed by a break. I mean, it’s not implausible.
“China has made a major, major pivot”
Gorman explained that another significant change that has happened recently has to do with China. He described:
The second thing that happened was that China made a major pivot. Now the focus was on reopening which was obviously critical.
“The recent economic pivot, the thawing of relations with the United States, the meeting … with the Deputy Prime Minister and Secretary Yellen, it is a big problem,” continued the CEO of Morgan Stanley.
U.S. Treasury Secretary Janet Yellen met with Chinese Vice Premier Liu He on Wednesday “as part of efforts to deepen communication and work together to address global challenges,” the Treasury said last week. In November last year, President Joe Biden and President Xi Jinping also met in Bali and “agreed to empower key senior officials to engage on these issues,” the Treasury added.
“According to President Xi’s common prosperity mantra, there are two ways to achieve this,” Gorman detailed, concluding:
One is to redistribute existing prosperity, so that everyone gets a slice of the pie. The other is to make the cake bigger so that everyone gets a piece of the cake. They pivoted, I think, from first to second. This is good news for global growth.
Do you agree with Morgan Stanley CEO James Gorman on inflation and pivoting China? Let us know in the comments section below.
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