Morgan Stanley CEO Says Inflation Has Peaked and China Has Made a Major Pivot

Morgan Stanley CEO James Gorman says two changes have happened recently that “really matter” to the economy. The executive explained that inflation has clearly peaked and China has made a “major, major pivot” economically.

The chairman and CEO of global investment bank Morgan Stanley, James Gorman, discussed the U.S. economy and China’s relationship with the U.S. in an interview with CNBC Thursday in Davos, Switzerland.

“Two things have changed recently that really matter,” he began, noting that the first concerns inflation while the second concerns China’s recent pivot economically.

“The inflation numbers are better,” the Morgan Stanley chief said, emphasizing:

Clearly, inflation peaked. That’s no longer a question. It’s a fact.

He added that the question is can the Federal Reserve get to its 2% inflation target and “how hard will they try to get to 2% vs. stabilizing around 3%, 4%.”

Regarding the Fed hiking interest rates, Gorman pointed out: “We were on a 75-basis point track. We then quickly moved to 50.” At the next Federal Open Market Committee (FOMC) meeting, he expects the Fed to increase rates by 25 basis points, stating: “I could see them doing 25, followed by 25, followed by a pause. I mean, that’s not implausible.”

Gorman explained that another important change that has happened recently concerns China. He described:

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

“The recent pivot economically, the relationship thawing with the U.S., the meeting … with the vice premier and Secretary Yellen — this is a big deal,” the Morgan Stanley CEO continued.

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

“Under President Xi’s mantra of common prosperity, there are two ways to achieve that,” Gorman detailed, concluding:

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

Do you agree with Morgan Stanley CEO James Gorman about inflation and China pivoting? Let us know in the comments section below.