U.S. Federal Reserve Chairman Jerome Powell holds a news conference in Washington, D.C., on September 18, 2024.
Mandel Ngan | AFP | Getty Images
The Federal Reserve's move to cut interest rates by 50 basis points puts the U.S. economy on track for a soft landing, according to Goldman Sachs“CFO.”
His comments come as market participants question whether the U.S. central bank's aggressive interest rate cut came at the right time to bring down inflation without pushing the economy into recession.
Some analysts have raised concerns about the outlook for the U.S. economy, warning that similar massive interest rate cuts would not be able to avert the economic recession of the early 2000s and the global financial crisis.
In a decision that surprised some economists, the interest-rate-setting Federal Open Market Committee voted Wednesday to cut the benchmark overnight borrowing rate by half a percentage point, or 50 basis points, to a target range of 4.75% to 5%. A basis point is equal to 0.01%.
This was the first time the Federal Open Market Committee had cut interest rates by this much since the early days of the coronavirus pandemic and, before that, the global financial crisis in 2008.
“I think this first 50 basis point cut is a clear signal in terms of the new direction,” Dennis Coleman, Goldman Sachs’ chief financial officer, told CNBC on Tuesday. “We hope that will unleash some additional confidence and will obviously reduce the cost of capital — and perhaps some of the more strategic activities heading into the end of this year.”
“As we move into 2025, we hope to see improved arrears and more activity across all markets,” he said.
Asked if the Fed's rate cuts had ensured a soft landing for the U.S. economy, Coleman said he hoped and expected that to be the case.
“Right now, that’s the consensus,” Coleman said. “It’s a very difficult task to manage economies through the transition. But as you know, inflation is trending down, unemployment is manageable, and they’ve started to cut interest rates and maintain a soft landing path.”
Damon: “Put me on the cautious side.”
But not everyone is convinced that the US economy will continue to hold up in the coming months.
“I’m bullish on the long term,” JPMorgan Chase CEO Jamie Dimon said in an exclusive interview with CNBC-TV18 released Tuesday. “In the short term, I’m more skeptical than most that everything is going to be okay.”
“Markets are pricing things as if they're going to be great. Put me on the cautious side of this,” he added.
— CNBC's Jeff Cox contributed to this report.
