Rate hike decision could put US economy in ‘very dire situation,’ expert warns

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3 years ago

March 22, 2023

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close video US economy faces very dire situation if Fed cant keep rates high: Mike Lee

A ‘Word on Wall Street’ panel with Michael Lee Strategy’s Mike Lee, Strategic Wealth Partners’ Mark Tepper, Bulltick Capital’s Kathryn Rooney Vera discuss market trends amid banking collapse volatility.

While some of America’s top banking CEOs discuss a new rescue plan and the Federal Reserve kicks off its two-day meeting, one market expert has warned of a "very dire situation" dependent on fiscal policy.

"If the Fed can't keep rates high, if they can't keep raising as they need be, and we have persistently high inflation, we are in a very, very, very, very dire situation," Michael Lee Strategy founder Mike Lee said on "Mornings with Maria" Tuesday.

"So I think the Fed goes 25 basis points. I think how the market reacts depends 100% on what Powell says and reacts to the questions and how the market absorbs that," he continued. "But what I see is not so much as a contagion from banks or some sort of massive solvency crisis, it's what do we do if the Fed can't raise any more, can't keep tightening? It has to ease, so there's no systemic shocks from the banking system."

With a strong market rally underway Tuesday morning, the Fed began discussing its latest interest rate decision. Sixty-two percent of investors expect the policymakers to continue hiking rates, which would mark the ninth straight increase, while 38% expect no change, according to CME's FedWatch.

BANK TURMOIL COULD BRING ‘VICIOUS’ END TO BEAR MARKET, MORGAN STANLEY SAYS

While the Fed under Chairman Jerome Powell has embarked on its most aggressive rate hike path since the 1980s to combat stubbornly high inflation, a recent report written by U.S. economists indicates if history is destined to repeat itself, then the Fed will "find it hard" to avoid a recession later this year.

The Federal Reserve could bring the U.S. economy into a “very dire situation,” Michael Lee Strategy founder Mike Lee said on “Mornings with Maria” Tuesday. (Fox News)

The central bank is also navigating bank-run contagion fears this week, after the recent insolvencies of Silicon Valley Bank and Signature Bank, and potentially First Republic Bank.

Lee signaled the banking and rate hike dilemmas are ones of "confidence," as opposed to structural issues. Image 1 of 4

Markets often react when Federal Reserve Chairman Jerome Powell speaks or announces a rate hike decision. | AP Newsroom

"No matter how good the banking laws are, no matter how good the oversight is, no matter how strong your balance sheet is, nobody can withstand a 20 to 25% deposit base withdrawal in a single day, as happened with Silicon Valley Bank," Lee explained. close video The Fed to meet this week to decide possible rate hike

Mercatus Center distinguished fellow Thomas Hoenig discusses how the Fed’s plan for inflation, argues it has been running poorly for years on The Bottom Line.

"So I think the upshot of what just happened is lending standards are most likely going to increase, further slowing the economy," he added.

Also joining the "Word on Wall Street" panel, Bulltick Capital’s chief market strategist Kathryn Rooney Vera agreed with Lee that the Fed will likely raise rates by 25 basis points Wednesday.

"It has to hike 25 basis points. It has a dual mandate, 2% inflation and full employment, it has to comply with that. If they do not hike this week, tomorrow, this is going to be a huge additional shock to credibility and they're very focused on that," Rooney Vera said. "So they have to recoup credibility. If they do not hike 25, I think it will be poorly received by the markets."

GET FOX BUSINESS ON THE GO BY CLICKING HERE close video US will see 25 basis point hike from the Federal Reserve: Michael Kantrowitz

Piper Sandler chief investment strategist Michael Kantrowitz provides insight on the Federal Reserve’s response to record-high inflation on ‘Making Money.’

Michael Wilson, the chief U.S. equity strategist at Morgan Stanley and a longtime Wall Street bear, said in an analyst note on Monday that the stock market is in the early and painful stages of exiting the bear market than began in the summer.

"The last part of the bear can be vicious and highly correlated," he said. "Prices fall sharply via an equity risk premium spike that is very hard to prevent or defend in one’s portfolio."

US

Zohran Mamdani: ‘Trump’s worst nightmare’ could be about to show how to take the fight to the president

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3 hours ago

November 4, 2025

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Zohran Mamdani: 'Trump's worst nightmare' could be about to show how to take the fight to the president

Zohran Mamdani calls himself “Donald Trump’s worst nightmare”. They are the words of a man living the dream.

It’s because the 34-year-old is the headline act in Tuesday’s referendum on Trump 2.0. A statement night in US politics, as Americans – some, at least – deliver a verdict on what they’ve seen so far.

Of four electoral contests across the US – including in California, New Jersey and Virginia – the race to be New York mayor is the most compulsive and consequential.

The polls have Mamdani, the Democratic nominee, as the frontrunner. If he wins, it would signify big change in the Big Apple.

Read more: Who is Zohran Mamdani?

Born in Uganda to Indian parents (he moved to the US aged seven), Mamdani would become New York’s first Muslim mayor.

He is a democratic socialist whose supporters will see victory as laying down a template for taking on Trump, even if the party’s old guard is sceptical.

An effective campaign has focused on the costs and quality of life in New York, promising universal childcare, a rent freeze, free bus travel and grocery shops run by the city.

So why is he controversial?

The message has resonated with New Yorkers squeezed on affordability, but his payment plan is open to question.

Mamdani plans to raise $9bn by raising taxes on the wealthy and on corporations, but he would face a struggle to gain the necessary consent of the New York State legislature and governor.

Mamdani’s politics are pegged to the “progressive” left wing of his party, and his campaign success plays into the Democrats’ quandary around a longer-term comeback strategy.

The politics that succeed in New York don’t necessarily resonate nationwide, and a party establishment has been reluctant to embrace Mamdani.

Democrat Chuck Schumer, Senate minority leader, has declined to endorse him at all.

Party management aside, he won’t have been impressed when Mamdani was arrested outside Schumer’s Brooklyn home as part of a 2023 protest calling for a ceasefire following Hamas’ October 7th attack on Israel.

Mamdani has been a staunch critic of Israel and, in the past, has advocated defunding the police, decriminalising prostitution and closing New York City jails.

His background and Islamic faith are threaded through opposition attacks. He has been criticised for refusing to denounce the phrase “globalise the intifada”, used by pro-Palestinian activists.

Subsequently, he said he would “discourage” the term and would combat antisemitism through actions as well as words.

It hasn’t stopped his Republican rival, Curtis Sliwa, claiming Mamdani supported “global jihad”.

Andrew Cuomo, running as an independent after losing the Democratic primary to Mamdani, has labelled him “the most divisive candidate I have ever experienced in New York”.

Trump gives Cuomo an endorsement – of sorts

Cuomo, the former New York governor who resigned over sexual harassment allegations, is Mamdani’s closest contender who has received support – of sorts – from Trump.

The president, who falsely labels Mamdani a communist, said on Truth Social on the eve of the election: “Whether you personally like Andrew Cuomo or not, you really have no choice.

“You must vote for him, and hope he does a fantastic job. He is capable of it, Mamdani is not!”

At a rally the same night, Mamdani fired back to say: “The MAGA movement’s embrace of Andrew Cuomo is reflective of Donald Trump’s understanding that this would be the best mayor for him.

“Not the best mayor for New York City, not the best mayor for New Yorkers, but the best mayor for Donald Trump and his administration.”

The Republican spin on the prospect of a Mamdani victory is that it would reflect a move towards radical extremism by the Democratic Party.

Trump has even suggested he may withhold federal funds from New York if Mamdani wins.

In time, Democrats would need to interpret and apply the lessons of a Mamdani victory. But more than anything else, they need a win to feel a pulse in a party undergoing an identity crisis.

One battle after another

The same applies to Tuesday contests for governor in New Jersey and Virginia, fascinating in terms of the vote winners and vote breakdown.

What will be the verdict, nine months in, of people who turned to Trump at the last election? Will he hold onto the Latino vote, given his immigration policy, ICE raids, and other orders?

In California, Tuesday sees a redistricting vote to counter Republican gerrymandering elsewhere. If backed by the public, the plan will increase the number of winnable Democratic seats in the House of Representatives.

It is the initiative of California’s Democratic governor, Gavin Newsom.

If he wins the day, his party will be enhanced and so will he, as the potential party nominee for president come the election in 2028.

US

Is this the week everything changes for the Democrats?

Published

3 hours ago

November 4, 2025

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Is this the week everything changes for the Democrats?

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Donald Trump sits down for an interview with CBS’ 60 Minutes – the programme he sued successfully for $16m just four months ago.

All the while, his poll numbers are at an all-time low due to the government shutdown, as hundreds of thousands of federal workers remain unpaid and food benefits for millions of people run out.

And is this the week the real Democrats stand up? Their favourability numbers are also dire, but will the emergence of a firebrand left-wing mayor in New York City, in the shape of Zohran Mamdani, and a handful of positive off-year election results on Tuesday be the spark they desperately need to counter Trump’s MAGA agenda?

You can also watch all episodes on our YouTube channel.

Email us on trump100@sky.uk with your comments and questions.

Technology

HSBC, General Atlantic CEOs flag AI capex-revenue mismatch, ‘irrational exuberance’

Published

3 hours ago

November 4, 2025

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HSBC, General Atlantic CEOs flag AI capex-revenue mismatch, 'irrational exuberance'

HONG KONG, CHINA – 2025/03/01: In this photo illustration, Artificial intelligence (AI) apps of perplexity, DeepSeek and ChatGPT are seen on a smartphone screen.

Sopa Images | Lightrocket | Getty Images

As companies pour billions into artificial intelligence, HSBC CEO Georges Elhedery on Tuesday warned of a mismatch between investments and revenues.

Speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, Elhedery said the scale of investment poses a conundrum for companies: while the computing power for AI is essential, current revenue profiles may not justify such massive spending.

Morgan Stanley in July estimated that over the next five years, global data center capacity would grow six times, with data centers and their hardware alone costing $3 trillion by the end of 2028.

McKinsey said in a report in April that by 2030, data centers equipped to handle AI processing loads would require $5.2 trillion in capital expenditure to keep up with compute demand, while the capex for those powering traditional IT applications is forecast at $1.5 trillion.

Elhedery said that consumers were not ready to pay for it, and businesses will be cautious as productivity benefits will not materialize in a year or two.

“These are like five year trends, and therefore the ramp up means that we will start seeing real revenue benefits and real readiness to pay for it, probably later than than the expectations of investors,” he said.

William Ford, chairman and CEO of General Atlantic, speaking at the same panel, agreed: “In the long term, you’re going to create a whole new set of industries and applications, and there will be a productivity payoff, but that’s a 10-, 20-year play.”

Big Tech firms Alphabet, Meta, Microsoft and Amazon have all lifted their guidance for capital expenditures and now collectively expect that number to reach more than $380 billion this year.

OpenAI, which set off the AI frenzy with the launch of ChatGPT in November 2022, has announced roughly $1 trillion worth of infrastructure deals with partners including Nvidia, Oracle and Broadcom.

Ford said that the huge expenditure that is going into the sector shows that people recognize the long-term impact of AI. This sector, however, will be capital-intensive initially, he said adding that “you need to, sort of, pay up front for the opportunity that’s going to come down the road.”

Ford warned there could be “misallocation of capital, destruction, overvaluation… [and] irrational exuberance” in the initial stages, and also added that it can be difficult to pick winners and losers at the moment.

“You’re really betting on this being a broad based technology, more like railroads or electricity, that had profound impacts over over time, and reshaped the economy, but were very hard to predict exactly how in the first few years.”