$9 trillion asset management company BlackRock says the Federal Reserve’s interest rate cuts will not be as deep as the market expects. BlackRock Investment Institute wrote in a note Monday that a resilient economy and inflation remaining sticky may hamper the Fed from making a steep interest rates cut.
Fed Rate Cuts Will Not be as Deep as Market Expects: BlackRock
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JUST IN: BlackRock says the Federal Reserve's interest rate cuts will not be as deep as the market expects.
The Federal Reserve will decide this week whether it will cut interest rates for the first time in four years. The US has been fighting a difficult battle with inflation since the end of the COVID-19 pandemic. That battle temporarily led to a year-long streak of interest hikes monthly. However, it is expected that the Fed will finally make its first cuts, after leaving interest rates unchanged throughout the summer.
BlackRock wrote that a reduction in interest rates of this magnitude reflects recession fears that are overdone, as well as expectations of a sustained decline in inflation which, instead, is likely to cool off only temporarily. “As the Fed readies to start cutting, markets are pricing in cuts as deep as those in past recessions. We think such expectations are overdone,” the investment institute added.
It is clearly the time for the Fed to cut rates,” the senators added in the letter. “In fact, it may be too late: Your delays have threatened the economy and left the Fed behind the curve.”
