Talk In Davos Of High For Longer As CEOs Wrestle With Rates

DAVOS: Business leaders and financiers in Davos this week said they are preparing for “high for longer” borrowing costs, despite markets betting on large-scale interest rate cuts this year, according to Reuters.
Jose Minaya, CEO of global investment manager Nuveen, which manages $1 trillion in assets said markets were “likely overestimating” the extent of rate cuts by central banks and investors need to prepare for a different environment.
“The next ten years are likely going to have lower returns than the previous ten years, you haven’t seen inflation in almost two decades,” he told the Reuters Global Markets Forum.
The US Federal Reserve is gauging whether inflation is sustainably back at its 2 percent target in order to lower interest rates, after 525 basis points of hikes since March 2022.
AlixPartners CEO Simon Freakley said executives globally are “hoping for the best but preparing for the worst,” as company boards plan for a high-for-longer scenario, while hoping rates will come down at least toward the end of the year.
The discussion within boardrooms was around having to manage increased interest costs than previously thought and having to accommodate that within their plans and budgets, Freakley said.
“Rates will be slow to come down, and it’s partly because international central banks were slow in taking them up,” said Nicolai Tangen, CEO of Norges Bank Investment Management.
“You don’t want to come back to some kind of 70s situation,” said Tangen, who leads the world’s largest sovereign wealth fund with $1.5 trillion in assets, referring to sustained hyperinflation in the 1970s.
US rate-futures contracts are now pricing in a year-end policy rate of around 3.88 percent from the Fed’s current 5.25 percent to 5.50 percent target range, and expecting rate cuts to begin in March.
“March is a very realistic starting point,” said Jan Hatzius, chief economist and head of global investment research at Goldman Sachs, who forecasts five US cuts for 2024.
Nevertheless, some doubt the US central bank will cut interest rates as rapidly as markets are forecasting.
“My personal view is that there’s a better than 50 percent chance that the Fed doesn’t cut rates this year,” Minaya said.
Barclays CEO C.S. Venkatakrishnan said in Davos he saw “maybe one” US interest rate cut by year-end.
“I don’t expect it to turn on a dime. I think if you look at the questions which we were asking ourselves a year ago or two years ago, they’re very different from the questions we ask ourselves now,” he told a Wall Street Journal event at Davos.
Saudi Arabias Property Market Set For Growth With Billions In New Projects
RIYADH: The Saudi real estate landscape is poised for substantial growth, as industry leaders, policymakers, and invest... Read more
SAMA Permits Full Public Launch Of STC Bank In Digitalization Push
RIYADH: The Saudi Central Bank, also known as SAMA, has authorized STC Bank to launch its full operations in Saudi Arabi... Read more
Al-Habtoor Group Halts Investment Plans In Lebanon Amid Growing Instability
DUBAI: UAE-based business conglomerate Al-Habtoor Group has abandoned its plans to reenter the Lebanese market, citing o... Read more
Experts Predict Suburban Boom, Smarter Housing Designs In Saudi Arabia
RIYADH: The rise of community living and the increased accessibility of suburbs, driven by advancements in transportatio... Read more
Foreign Investments Set To Revive Makkahs Property Market: Ladun CEO
RIYADH: Saudi construction firm Ladun Investment Co. expects a surge in Makkah’s real estate sector following a key ru... Read more
Closing Bell: Saudi Arabias Main Index Closes In Green At 12,421
RIYADH: Saudi Arabia’s Tadawul All Share Index edged up on Tuesday, gaining 47.75 points, or 0.39 percent, to close at... Read more