Morgan Stanley CEO James Gorman sees 50-50 chances of economic crisis ahead

Morgan Stanley Chairman and Chief Executive James Gorman speaks throughout the Institute of International Finance Annual Meeting in Washington, October 10, 2014.

Joshua Roberts | Reuters

The chances of an economic downturn might be climbing up as the Federal Reserve wrangles with inflation, however it’s not likely to be a deep one, according to Morgan Stanley CEO James Gorman.

“It’s possible we go into recession, obviously, probably 50-50 odds now,” Gorman stated Monday at a monetary conference held by his New York-based bank. That’s up from his previously 30% recession-risk price quote, stated Gorman, who included that “we’re unlikely at this stage to go into a deep or long recession.”

Gorman was speaking as markets remained in freefall amidst expectations that reserve banks require to strongly fight inflation. Bank executives have actually raised alarms about the economy just recently as the Fed raises rates and reverses quantitative relieving programs. Rival CEO Jamie Dimon stated he forecasted a “hurricane” ahead due to reserve banks and the Ukraine dispute.

But Gorman revealed self-confidence that the Fed would become able to bring inflation below its multi-decade highs.

“I don’t think we’re falling into some massive hole over the next few years, I think eventually the Fed will get hold of inflation,” he stated. “You know that it’s going to be bumpy; people’s 401(k) plans are going to be down this year.”

While markets have actually been crashing this year, the basics of the economy, consisting of customer and business balance sheets, remain in much better shape than markets recommend, which offers Gorman convenience, he stated.

Still, the Fed waited too long to raise rates, which provides less space to maneuver ought to an economic downturn start, Gorman stated. The CEO started going over the danger of an economic downturn with his internal committees last August or September when it was clear that inflation was going to be more relentless than hoped, he stated.

“We’re in sort of a ‘Brave New World’ right now, and I don’t think there’s anybody in this room who could accurately predict where inflation is going to be a year from now,” Gorman stated.


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