The US Federal Reserve Expected to Pause Aggressive Monetary Tightening Agenda, Says Standard Chartered CEO

The CEO of Standard Chartered bank, Bill Winters, told CNBC that the US Federal Reserve is set to temporarily pause its aggressive monetary tightening agenda following the central bank’s decision last week to raise interest rates by 25 basis points; a move that signaled it plans to hold steady at its next meeting in June. Winters added that this would likely mark an opportunity for policymakers to take stock of the latest data and the extent to which their efforts to cool inflation are succeeding, rather than marking an end to the current tightening cycle. However, he believes that it is not yet done. Winters thinks that the Fed will pause from here, but it has to determine whether the inflation numbers will come down.

Of particular concern to central bankers is still rising wages, which they fear could prompt a wage-price spiral, with higher wages pushing up prices and causing inflation to become embedded. To avoid that, policymakers want to see that job and wage growth is cooling before ending the hiking cycle entirely. Winters said that job growth is still pretty strong, wage growth is still pretty strong, and that’s not just in the US; it’s also in Europe, the UK, and many other parts of the world. If regular wage growth cycles can be brought under control, then Winters believes the Fed can stop here. However, the Fed is not done yet.

Winters noted that when the Fed eventually decides it has inflation under control and stops raising rates, that will have a slowing effect on the US economy and possibly beyond. However, growth continues to look resilient in other parts of the world, specifically Asia, which should provide a strong tailwind for businesses like Standard Chartered that operate primarily in Asia and emerging economies. He is hopeful that the rotation of growth, away from the US and Europe, which are inevitably slowing, will rotate through to China and the rest of Asia, which are on a post-Covid upswing.

The CEO also batted down ongoing speculation that the bank could be poised for a potential takeover bid, though he took nothing off the table. Winters thinks that they can run this bank independently for the long term and generate excellent returns for their shareholders. If somebody thinks they can do even better, they can have a chat, but that has not happened.