Ted Pick, the CEO of American investment bank Morgan Stanley, stated on the 29th (local time) that the era of ‘zero interest rates’ from the past has come to an end.
CEO Pick attended the Future Investment Initiative (FII) event held in Riyadh, Saudi Arabia, and remarked that the era of financial repression, zero interest rates, and zero inflation is over.
He further predicted that “interest rates will rise, and the world will be challenged,” adding that the “end of history” is over, and geopolitical tensions will return to be among the challenges for the coming decades.
The “end of history” he referenced is the title of a book published in 1992 by Stanford University political scientist Francis Fukuyama, which discussed the end of ideological battles and the victory of liberal democracy.
Pick also commented, “We faced stimulus measures and zero interest rate policies post-pandemic, allowing small enterprises to go public without significant business plans. Despite facing tough times with interest rate hikes over the last 18 months, almost nothing happened,” indicating a move towards a more normalized rhythm, and highlighting the difficulty in maintaining public-listed companies.
Pick’s remarks suggest that due to intensified US-China competition and the resurgence of protectionism, leading to increased inflationary pressure, the US central bank may find it challenging to rely again on ultra-low interest rate policies even if the economy slows down.
It also implies the imminent restructuring for companies that expanded easily thanks to the past era of ultra-low interest rates.
Other major CEOs on Wall Street have also warned about inflation risks. Larry Fink, CEO of BlackRock, mentioned at a panel that “we are living in a world with more embedded inflation than we’ve seen,” cautioning that the Federal Reserve (Fed) may not lower rates as quickly as the market expects.
Jamie Dimon, chairman of JP Morgan, also warned at the American Bankers Association’s annual meeting the day before that inflation may not disappear as quickly as previously thought, and alerted of the risks of stagflation.