Will the Fed cut interest rates twice this year? Many Wall Street big shots dare not agree!

Some globally renowned figures in the financial industry gathered at the Future Investment Initiative (FII) in Saudi Arabia seem to suggest that the market's bet on a rate cut by the Federal Reserve may have gone too far. During group discussions, when asked if the Fed will implement two more rate cuts this year, including CEOs from BlackRock, Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered Bank, and Deutsche Bank, among other Wall Street big shots, none raised their hands. Most agreed that the Fed may cut rates one more time by the end of 2024. BlackRock CEO Larry Fink expressed a similar view earlier on Tuesday. He believes that the Fed will not cut rates as expected by the market because "hidden inflation" is too high. Differing from the predictions of two more rate cuts by other market participants within the year, the world's largest asset management company expects only one more rate cut by the end of this year. The company manages over $10 trillion in assets. Fink stated in the group discussion, "I think, fairly, the Fed will cut rates by at least another 25 basis points this year, but having said that, I do believe that global hidden inflation is more severe than ever before." He pointed out, "Our government and its policies are increasingly prone to causing inflation. Policies like immigration and reshoring of manufacturing, no one asks 'what is the cost'. But I would say, historically, we are more of a consumer-driven economy, the cheapest product is the best, the most advanced form of political propaganda." The reshoring of manufacturing in the U.S. highlighted the country's efforts in recent years (especially post-COVID-19) to reduce reliance on foreign supply chains and promote domestic employment. Legislation by the Biden administration, such as the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, has propelled these efforts. However, these changes may lead to price increases as American workers' wages are higher than many overseas manufacturing workers. "Currently, I believe our government policies embed inflation, having said that, we will not see interest rates as low as people predict," Fink said. The Fed cut the benchmark interest rate by 50 basis points in September, marking a turning point in its management of the U.S. economy and inflation outlook. In a report in late September, strategists from Morgan Stanley and Fitch Ratings predicted that the Fed will cut rates two more times by the end of 2024 and expect such cuts to continue until 2025. Goldman Sachs CEO David Solomon stated, "It is difficult to consider monetary policy at the moment before the end of the election and we have a clear understanding of policy actions."