Morgan Stanley CEO says the era of zero interest rates and inflation 'is over'

RIYADH — The days of easy money and zero interest rates are firmly in the past, Morgan Stanley CEO Ted Pick said Tuesday, speaking at a panel of finance CEOs in Riyadh.

"The end of financial repression, of zero interest rates and zero inflation, that era is over. Interest rates will be higher, will be challenged around the world. And the end of 'the end of history' — geopolitics are back and will be part of the challenge for decades to come," Pick said, referencing the famous 1992 Francis Fukuyama book, "The End of History and the Last Man," which argued that conflicts between nations and ideologies were a thing of the past with the ending of the Cold War.

Repressed rates and easy monetary policy have been in the rearview mirror since 2022, when — after slashing rates to near zero to deal with the Covid-19 pandemic — the Federal Reserve cranked its benchmark rate up by around 500 basis points over the course of 18 months.

"We had the sugar high of Covid and zero rates, so small companies could go public without much of a business plan, and then we had this pretty tough funk for about 18 months when almost nothing was happening," Pick said of that period, talking about challenges for publicly-listed companies.

"And now it feels like a more normalized cadence. It is tougher being a public company," he said at a panel moderated by CNBC's Sara Eisen at the Future Investment Initiative in Saudi Arabia.

The Fed cut its benchmark rate by 50 basis points in September — the first reduction since March 2020 — signaling a turning point in its management of the U.S. economy and in its outlook for inflation.

In late-September reports, strategists at J.P. Morgan and Fitch Ratings predicted two additional interest rate cuts by the end of 2024, and expect such reductions to continue into 2025.

Several of Wall Street's chief executives seem to disagree, citing expectations of continued inflation.

At an earlier panel on Tuesday at FII, guests including the CEOs of Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered and State Street were asked to raise their hand if they believed two more rate cuts would be implemented by the Fed this year. None of the panelists raised their hands.