Starwood Capital Group’s Barry Sternlicht said the Fed will be forced to halt rate hikes as the pace of tightening has made it too costly for the government to pay the interest on its debt pile.
“Rates will come down in the United States because they’ll have to come down,” Sternlicht said on the second day of Saudi Arabia’s Future Investment Initiative. “The biggest victim of the Fed increasing rates is actually the federal government who now has to pay 5% on $33 trillion worth of debt.”
The CEO of Starwood predicted other Western central banks would follow suit or end up “printing money endlessly” to pay deficits. Looking ahead to a year from now, he said he expects to be more bullish and called for the short-end of the Treasuries yield curve to retreat to 4% from above 5% now.
BofA’s DeMare Warns of ‘Dangerous’ Effects of High Rates, Yields (1:10 P.M.)
Bank of America Corp.’s Jim DeMare warned of the knock-on effects of short-term Treasury yields at 5% and said higher interest rates are having a “dramatic change” on the biggest global industry trends.
“The returns to take risk, to draw you in to take risk, are increasing,” the Wall Street bank’s head of global markets said. “That’s dangerous because that’s going to prevent capital from flowing to innovative industries, innovative companies.”
Speaking on the panel alongside DeMare, Tyler Dickson, head of investment banking at Citigroup Inc., said his bank is interested in the technological revolution, energy transition and future of health care.
Kushner Says Hamas Attack an Attempt to Thwart Mideast Progress (11:20 a.m.)
Jared Kushner said he believes the Hamas attack on Israel was aimed at thwarting regional stabilization efforts, including talks between Saudi Arabia and Israel.
“When the forces of good are winning, the forces of evil will try to stop them and that’s really what I believe the terrorist attack was meant to do...” said said Kushner, the CEO of Saudi-backed Affinity Partners and son-in-law of former President Donald Trump. “The progress between Saudi Arabia and Israel was progressing incredibly well and I do think that that poses a big threat to the forces of evil,”
Kushner also said the Abraham Accords are more important now than ever before and emphasized the importance of Palestinian people having a functioning state.
IMF Warns on Prolonged Middle East War, Higher Rates for Longer (11:05 a.m.)
The IMF warned that a prolonged war between Hamas and Israel risks impacting neighboring countries such as Egypt, Lebanon and Jordan.
“What is happening in the Middle East is happening at a time when growth is slow, interest rates are high, the cost of servicing debt that has gone up because of Covid and the war,” Georgieva said.
Georgieva also reiterated the fund’s stance on interest rates, saying they have gone too high, too quickly, while calling for a normalization in monetary policy.
Saudi Says Don’t Want Mideast Conflict to Derail Hope (10:25 a.m.)
Saudi Arabia’s Minister of Finance Mohammed Al-Jadaan said the country was making a lot of effort to ensure that progress on de-escalation that took place before the Oct. 7 attack by Hamas on Israel is not derailed.
“We have seen this in the region that before 7th of October a lot of de-escalation has happened which brought a lot of hope for the region and we don’t want the recent events to derail that,” Jadaan said at the Future Investment Initiative summit in Riyadh.
“So we are making a lot of efforts with our partners to ensure that we go back to where we were and continue the development path,” he said.
Al-Jadaan said there’s a need to work closely with other countries and multi-lateral institutions such as the IMF to prevent fragmentation because without this kind of collaboration, “it is going to be a very difficult world,” he said.
Saudi Developer to Spend $10 Billion on Diriyah Project (9:25 a.m.)
The developer behind an ambitious plan to transform a historic Saudi town into a sprawling tourism destination is set to splash out $10 billion on the project next year.
The $63 billion project at Diriyah, a UNESCO World Heritage site north-west of Riyadh that was the ancestral home of the ruling family, will feature dozens of hotels and thousands of homes. The Diriyah Gate Development Authority spent $7.5 billion last year building out infrastructure at the 14 square-kilometer project, Chief Executive Officer Jerry Inzerillo said in an interview.
--With assistance from Abeer Abu Omar, Matthew Martin, Archana Narayanan, Zainab Fattah, Julia Fioretti, Salma El Wardany, Farah Elbahrawy, Adveith Nair, Shaji Mathew, Christine Burke and Ben Bartenstein.
