The Federal Reserve’s recent decision to lower interest rates by 50 basis points has set the U.S. economy on a trajectory for a potential “soft landing,” according to Goldman Sachs’ chief financial officer. This move, announced during a press conference held by U.S. Federal Reserve Chair Jerome Powell in Washington, D.C., on September 18, 2024, is intended to curb inflation without triggering a recession.
Market analysts, however, are debating whether the significant rate cut came sufficiently early to achieve this delicate balance. Historical precedence raises some concerns, as similar substantial rate reductions in the early 2000s and during the global financial crisis failed to prevent economic downturns.
In an unexpected move, the Federal Open Market Committee (FOMC) voted on Wednesday to decrease its benchmark overnight borrowing rate by half a percentage point, bringing it to a targeted range of 4.75% to 5%. This marks the first time the FOMC implemented such a steep cut since the early days of the COVID-19 pandemic and, prior to that, the global financial crisis of 2008.
Denis Coleman, Chief Financial Officer at Goldman Sachs, discussed the implications of the rate cut with CNBC’s Annette Weisbach. He described the 50 basis point reduction as a clear indicator of the Fed’s new direction, expected to boost confidence, lower capital costs, and potentially stimulate strategic activities towards the end of the year. Coleman expressed optimism for increased market activity and improved economic backlogs moving into 2025.
When questioned about the likelihood of achieving a soft landing for the economy, Coleman suggested that this outcome is both his expectation and the prevailing consensus. He acknowledged the complexity of managing economic transitions but noted the positive trends of decreasing inflation and manageable unemployment levels.
Contrasting this optimism, JPMorgan Chase CEO Jamie Dimon expressed skepticism about the near-term economic outlook. In an exclusive interview with CNBC-TV18, Dimon voiced his cautious stance, acknowledging the markets’ positive pricing while personally taking a more conservative view.
This report also includes contributions from CNBC’s Jeff Cox.
