Goldman Sachs CFO "likes" the Fed's significant rate cut: A soft landing for the US economy is in sight
Goldman Sachs CFO Denis Coleman stated that the 50 basis point rate cut by the Federal Reserve put the U.S. economy on a path to a soft landing, boosting confidence and reducing the cost of capital. He expects this move to improve market activity. However, despite this, there are still doubts in the market about the economic outlook, with Morgan Stanley CEO Jamie Dimon maintaining a cautious stance on short-term optimism
According to the financial news app Zhitong Finance, Goldman Sachs CFO Denis Coleman stated on Tuesday that the Federal Reserve's 50 basis point rate cut has put the U.S. economy on a path to a soft landing.
At the time of Coleman's remarks, market participants questioned whether the Fed's significant rate cut was timely enough to curb inflation without the economy falling into a recession.
Some analysts expressed concerns about the outlook for the U.S. economy, warning that similar large rate cuts may not prevent an economic downturn like the one seen in the early 21st century and the global financial crisis.
The Federal Reserve surprised some economists last Wednesday by cutting rates by 50 basis points. This is the first time the Fed has made such a significant rate cut since the early days of the 2019 COVID-19 pandemic and the 2008 global financial crisis.
Coleman stated on Tuesday, "I believe the initial 50 basis point rate cut is a clear signal of a new direction. Hopefully, this will release more and more confidence and significantly reduce the cost of capital - perhaps even take some more strategic actions before the end of this year."
He added, "As we move into 2025, this move is expected to improve the overall market congestion and promote market activity."
When asked if the Fed's rate cut has ensured a soft landing for the U.S. economy, Coleman expressed his hope and expectation that it would.
"At present, this is the consensus," Coleman said. "Managing the economy during a transition has always been a very tricky job. But inflation is declining, the unemployment rate is at a manageable level, the Fed has started to cut rates, and to some extent, maintain the trajectory of a soft landing."
Not everyone believes that the U.S. economy will continue to remain robust in the coming months.
Jamie Dimon, CEO of JPMorgan Chase, stated in an interview on Tuesday, "I am a long-term optimist. But in the short term, I am more skeptical than others that everything will turn out well."
"The pricing in the market seems to indicate that things will improve. I am cautious about this," he added