Fed’s jumbo rate cut puts the U.S. on track for soft landing

The Federal Reserve cuts interest rates by 50 basis points, and the U.S. economy is expected to have a soft landing Goldman Sachs” CFO.

His comments came as market participants questioned whether the Federal Reserve's steep rate cuts could lower inflation in time without pushing the economy into recession.

Some analysts have expressed concerns about the outlook for the U.S. economy, warning that similar deep interest rate cuts would not avert the recession and global financial crisis of the early 2000s.

The rate-setting Federal Open Market Committee voted Wednesday to cut its benchmark overnight borrowing rate by half a percentage point, or 50 basis points, to a target rate of 4.75% to 5%, a decision that surprised some economists. 1 basis point equals 0.01%.

This is the first time the Federal Open Market Committee (FOMC) has cut interest rates by this much since the early days of the coronavirus pandemic and the 2008 global financial crisis before that.

“I think the first 50 basis points rate cut is a clear signal of a new direction. Hopefully that will unleash more confidence and significantly lower the cost of capital – perhaps for some more strategic activity heading into the end of the year this year,” said Goldman Sachs chief executive Chief Financial Officer Dennis Coleman told CNBC's Annette Weisbach on Tuesday.

“As we move into 2025, we are on track to improve the backlog and increase activity across the market,” he said.

Asked whether a rate cut by the Federal Reserve might ensure a soft landing for the U.S. economy, Coleman said he hopes and expects that to be the case.

“Right now, that's the consensus,” Coleman said. “Managing an economic transition is always a very tricky job. But you know, inflation levels are coming down, unemployment is manageable, they're starting to cut interest rates and maintain a soft landing trajectory.”

Not everyone is convinced that the U.S. economy will continue to grow in the coming months.

“I'm a long-term optimist. In the short term, I'm more skeptical than others that everything is going to be okay,” J.P. Morgan CEO Jamie Dimon said in an exclusive interview with CNBC-TV18 released on Tuesday.