Fed to deliver four interest rate hikes in 2022 despite war – Morgan Stanley

Morgan Stanley Chief Executive Officer (CEO) James Gorman said Tuesday, the US Federal Reserve (Fed) should remain on track for a series of interest rate hikes this year even though the Russia-Ukraine war has triggered geopolitical and economic risks.

Key quotes

“You have to raise rates, but you don’t want to tip the economy into recession,” 

 “If you tip the economy into recession, you get stagflation, that’s really bad.”

“Met with Powell days before departing for Australia, believed the central bank had planned to launch its tightening with a 50 basis-point hike, but recent events had lowered the ambition.”

“That was absolutely locked in and they won’t now.”

“I’d be stunned if they do that because you can’t throw boldness on top of uncertainty.”

“My current bidding is the Fed will raise very methodically now. The worst thing that can happen is that the war recedes, the world reverts to somewhat normal, now inflation is raging, and the Fed didn’t do enough. It’s a tough hand.”