Goldman Sachs CFO Dennis Coleman said the Federal Reserve’s recent decision to cut interest rates by 50 basis points should position the U.S. economy for a soft landing.
What Happened: The Federal Open Market Committee voted last Wednesday to cut its benchmark overnight borrowing rate by half a percentage point, targeting the rate at 5% from 4.75%, the first significant cut since the early days of the COVID-19 pandemic.
Coleman expressed optimism in an interview with CNBC on Monday, saying “this first 50 basis point cut is a clear signal of a new direction,” adding that he expected the move to boost market confidence and reduce the cost of capital.
Regarding a soft landing, he said that while it is a common view, “managing an economy in transition is always a very difficult task, but inflation is falling, unemployment is manageable, interest rate cuts are starting to be implemented and we are beginning to stay on track for a soft landing.”
See: “Pleasantly surprised” that Obama-era economist J.D. Vance thinks economy is too strong for interest rate cuts
But not all experts share that optimism. JPMorgan Chase CEO Jamie Dimon expressed skepticism in an interview, saying he’s “a little more skeptical than most about whether everything will work out in the short term.”
Why it matters: The Federal Reserve’s decision to cut interest rates by 50 basis points marks the first rate cut in more than four years. The bold move surprised Wall Street analysts, who had expected a more modest cut of 25 basis points. The big cut resonated with investor sentiment, tilting them toward more aggressive easing measures.
Additionally, Chicago Fed President Austan Goolsbee, speaking to the Economic Club of Minnesota, suggested a series of rate cuts over the next 12 months is possible. Goolsbee suggested the Fed is preparing to pivot from its current tightening stance to support the state of the economy as the focus shifts from inflation to the labor market. He pointed to the rapid deterioration of the labor market and warned that a 0.7% increase in the unemployment rate within a year is typically a harbinger of a recession.
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This story was produced by Benzinga Neuro and edited by Pooja Rajkumari.
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