Morgan Stanley CEO James Gorman Made two observations about recent events that have a big impact on the economy. He says inflation has definitely peaked and China has experienced a “very important turnaround”.
The US Economy and Inflation According to Morgan Stanley Chief
Global investment bank Morgan Stanley’s chairman and CEO James Gorman discussed the US economy and US-China relations in an interview with CNBC on Thursday in Davos, Switzerland.
“Two things have changed recently that really matter,” Gorman began, noting the contrast between inflation and deflation. He then commented on China’s recent economic recovery.
“The inflation numbers are better,” the Morgan Stanley CEO said, adding, “It is quite clear that inflation has reached its peak. That is no longer in doubt. It is a fact.”
He went on to say that the question now is: “How hard will the Fed try to get to 2% inflation instead of stabilizing around 3%, 4%?”
Regarding the Fed’s rate hike, Gorman pointed out: “We were on a path of 75 basis points and then we quickly dropped to 50.” He anticipates that the Fed will raise rates by 25 basis points at the next Federal Open Market Committee (FOMC) meeting, and adds, “I can imagine them doing a 25-point increase followed by another 25-point increase and then a pause. It is possible, not impossible.”
‘China has made a significant turn.”
The Morgan Stanley CEO went on to explain that another important change has taken place recently in China. He explained:
The second is that China has made a major shift. Now the focus is on reopening, which was extremely important.
“The recent economic turnaround, the thawing of the US-China relationship, the meeting between Vice Premier Liu He and Treasury Secretary Janet Yellen – this is a big deal,” the Morgan Stanley CEO continued.
Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He met on Wednesday “as part of efforts to deepen communication and work together to address global challenges,” Treasury said in a statement. Last week, President Joe Biden and Chinese President Xi Jinping met in Bali and “agreed to empower senior officials to participate in these matters,” Treasury added.
“Under President Xi’s mantra of common prosperity, there are two ways to achieve this,” Gorman explained, concluding:
One is to redistribute existing prosperity so that everyone gets a slice of the pie. The other is to make the pie bigger so everyone can get a piece. I think they have shifted from the former to the latter. This is good news for global economic growth.
Do you agree with Morgan Stanley CEO James Gorman’s comments on inflation and China’s turnaround? Let us know what you think in the comments section.
