Given the current strong economic growth rate, 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 announce tightening. tight currency in 2022.
“We’re headed for a rising interest rate environment,” Gorman told CNBC’s Wilfred Frost in an interview on “Closed bell.” “I feel the Federal Reserve would better store some of the rate hikes, so when the inevitable recession hits, you’ll have some ammunition to fight.”
Fed President Jerome PowellMe in recent days has grown strong sign of a policy axis.
The Fed is ready to let inflation heat up until jobs fully recover. However, with consumer prices at their highest level in nearly 40 years, officials said they were willing to withdraw some of the extremely easy measures put in place during the Covid crisis.
The first would be to accelerate the rate at which the Fed cuts its monthly purchases. The widely anticipated Federal Open Market Commission doubled to $30 billion a month.
That would allow the Fed to start raising rates as soon as March 2022, though markets think the first hike could happen in May.
Gorman said the Fed is “10 times higher than normal,” or what rate would be considered neither too loose nor too tight.
“If I were the Fed, I’d start moving sooner rather than later. Let’s stock up on some ammunition and accept reality,” Gorman said.
Rather than slow the recovery, Gorman said a rate hike would stabilize the economy, even if it could upset financial markets for a short time.
“I don’t think it derails the economy. This is what you need, you need balance in the economy,” he said.
