Morgan Stanley CEO says inflation has peaked and China has made a major shift

Morgan Stanley CEO James Gorman says two changes have occurred recently that “really matter” for the economy. The leader explained that inflation has clearly peaked and that China has made a “major, major pivot” on the economic level.

Morgan Stanley CEO on the U.S. economy and inflation

Global investment bank Morgan Stanley Chairman and CEO James Gorman discussed the U.S. economy and China-U.S. relations in an interview with CNBC Thursday in Davos, Switzerland.

“Two things have changed recently that are really important” he began, noting that the first is inflation while the second is China’s recent economic pivot.

“Inflation figures are better“, said the head of Morgan Stanley, insisting:

It is clear that inflation has peaked. It’s no longer a question. It is a fact.

He added that the question is whether the Federal Reserve can meet its 2 percent inflation goal and “how hard will it try to hit 2 percent rather than stabilize around 3 percent, 4 percent.”

Regarding the Fed raising interest rates, James Gorman noted, “We were on a 75 basis point path. Then we quickly went to 50“. At the next Federal Open Market Committee (FOMC) meeting, he expects the Fed to raise rates by 25 basis points, stating, “I could see them doing 25, followed by 25, followed by a pause. I mean, it’s not implausible“.

China has made a major, major pivot’.

James Gorman explained that another major change that has occurred recently involves China. He described:

The second thing that happened was that China made a major, major pivot. Now the emphasis was on reopening which was obviously critical.

“The recent economic pivot, the thawing of relations with the United States, the meeting with Deputy Prime Minister and Secretary Yellen – this is a big deal“, continued the Morgan Stanley CEO.

U.S. Treasury Secretary Janet Yellen met Wednesday with Chinese Vice Premier Liu He “As part of efforts to deepen communication and work together to address global challenges“, Treasury explained last week. In November of last year, President Joe Biden and President Xi Jinping also met in Bali and “agreed to empower key senior officials to engage on these issues“, Treasury further noted.

“According to President Xi’s shared prosperity mantra, there are two ways to achieve this“, James Gorman detailed, concluding:

One is to redistribute existing prosperity, so that everyone gets a piece of the pie. The other is to grow the pie so that everybody gets a piece of the pie. They have pivoted, I think, from the former to the latter. That’s good news for global growth.