World Economic Forum 2024: Itau's Mario Mesquita warns of over-optimism on rate cuts

Davos [Switzerland], January 17 : In a candid discussion at the World Economic Forum's Annual Meeting 2024, Mario Magalhaes Carvalho Mesquita, Senior Executive at Itau, expressed caution amid the prevailing optimism regarding rapid rate cuts in mature economies this year.

Mesquita highlighted the expectation that the global economy would grow around three per cent in 2024, slightly below the century's average, creating some slack that might contribute to reducing inflation.

However, he emphasized the need for a soft landing, recognizing the existing tight labour markets in numerous countries.

Mesquita during the discussion said, "We believe that the global economy will grow around three percent this year, slightly below the century's average. This might build up some slack, allowing inflation to come down, but with limits, considering tight labour markets in many countries. It's a soft landing, but we need to see a landing."

"The market, in our view, is too optimistic about rate cuts in mature economies. It's not that they won't cut, but probably not as much as is priced in. Overdoing it may lead to a situation where we won't even have a landing, and they might need to correct course in the opposite direction down the road. So, we are a bit cautious on that," he added.

The remarks come against the backdrop of the global economic landscape, with markets closely watching for signals of central banks' actions amid concerns about inflation, labour market conditions, and the overall trajectory of economic recovery.

Mesquita's perspective introduces a note of caution, suggesting that while rate cuts may occur, the extent might not align with the optimistic expectations currently reflected in market sentiment.

As economic discussions continue at Davos 2024, participants are weighing various factors influencing global economic trends and potential policy responses.

Mesquita's insights add to the nuanced dialogue around the challenges and considerations that economies face in navigating the path forward in an evolving financial landscape.

The Annual Meeting of the World Economic Forum provides a platform for thought leaders, policymakers, and industry experts to exchange ideas and perspectives on critical global issues.

As the discussions unfold, participants are keenly observing signals that may impact economic policies, financial markets, and broader trends shaping the global economy.

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