US Federal Reserve Chairman Jerome Powell holds a press conference in Washington, DC, on September 18, 2024.
Mandel Ngan | AFP | Getty Images
The Federal Reserve’s move to cut interest rates by 50 basis points puts the US economy on the path to soft ground, according to the report. Goldman Sachs‘Chief financial officer.
His comments come as market participants question whether the US central bank’s jumbo tapering was done early enough to reduce inflation without collapsing the economy.
Some analysts have expressed concern about the state of the US economy, warning that similar rate cuts could not prevent the recession of the early 2000s and the global financial crisis.
In a decision that came as a surprise to some economists, the Federal Open Market Committee on Wednesday voted to cut the overnight lending rate by half a point, or 50 basis points, to a target range of 4.75% to 5%. One basis point equals 0.01%.
It was the first time the FOMC has cut that much since the early days of the coronavirus pandemic, and, before that, the global financial crisis in 2008.
“I think this 50 basis point cut is a clear signal in terms of a new direction. And hopefully that will open up higher levels of confidence, and obviously it should reduce the cost of capital – and maybe the strategic work that’s coming to an end this year,” Denis Coleman, chief financial officer at Goldman Sachs, told CNBC’s Annette Weisbach on Tuesday.
“As we enter 2025, [it will] I hope it will improve the backlog and a lot of work in the markets as a whole,” he said.
When asked if the reduction of the Fed’s rate is likely to prevent the US economy from slowing down, Coleman said that it is his hope and expectation that this will be the case.
“Right now, that’s a consensus,” Coleman said. “It is always a very difficult task to manage the economy through reform. But you know, inflation rates are going down, unemployment is under control, they are starting to reduce rates and maintain a low level.”
Dimon: ‘Put me on the cautious side’
Not everyone is convinced that the US economy will continue to stagnate in the coming months.
“I’m optimistic for the long term. Short term, I’m a little more skeptical than some people that everything will be fine,” said JPMorgan Chase CEO Jamie Dimon in an exclusive interview with CNBC-TV18 released Tuesday.
“Markets are pricing things like they’re going to be good. I’m on the cautious side of that,” he added.
— CNBC’s Jeff Cox contributed to this report.