Bankers At Davos Add To Chorus Of Caution On Interest Rate Cuts
(Bloomberg) -- There's a repeated refrain from the throngs of financiers in Davos this week: rein in your rate cut expectations.
Everyone from JPMorgan Chase & Co.'s Daniel Pinto to Standard Chartered Plc's Bill Winters to Cantor Fitzgerald's Howard Lutnick have said they expect monetary policy to ease slower than anticipated by the market.
“It doesn't make sense,” State Street Chairman and CEO Ron O'Hanley said. “The Fed was very clear in their dot plot, and I don't know why the markets decided to double it and then go to town on that.”
Their caution echoes that of central bankers in recent days, which has already prompted traders to wind back bets on aggressive interest-rate cuts this year.
Markets now imply 150 basis points of cuts in the US this year, from as much as 166 basis points last week. The chance of a cut in March, once seen as certain, is now just over 50%.
In Europe, its a similar situation. ECB President Christine Lagarde followed with her own remarks Wednesday that market bets are a distraction.
“It is not helping our fight against inflation, if the anticipation is such that they are way too high compared with what's likely to happen,” she said in an interview at Bloomberg House in Davos.
Read more: Traders Heed Central Bank Pushback Against Bold Rate-Cut Bets
There's still room for nuance. Rate cuts are coming sooner rather than later to help with a looming recession, according to the chief investment officer of Guggenheim Partners Investment Management.
“That's not exactly the mainstream opinion but we see a lot of softness in the economy coming ahead,” Anne Walsh said in a Bloomberg Television interview.
“We still see a recession coming,” Walsh said. “As a result, we still see rate cuts and we are actually predicting that they start sooner rather than later.”
Away from monetary policy, executives have voiced views on different topics. Walsh flagged her concerns about US regional banks as Pinto indicated JPMorgan expected to boost its headcount this year and Deutsche Bank AG's James von Moltke prepared staff for a tough bonus season. Jamie Dimon said his personal advice would be to avoid bitcoin even as Lutnick vouched for Tether's reserves.
--With assistance from Steven Arons, Alexandre Rajbhandari, Donal Griffin, Zoe Schneeweiss, Marion Dakers, Nishant Kumar, Annmarie Hordern, Lisa Abramowicz, Jonathan Ferro, Francine Lacqua, Jenny Surane, Harry Wilson, Nicolas Parasie, Loukia Gyftopoulou, Stefania Bianchi, Sam Nagarajan, Myriam Balezou, Jeff Black and Liza Tetley.
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©2024 Bloomberg L.P.
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