The Fed is likely to disappoint markets with just one more rate cut this year amid global inflation, BlackRock CEO says

BlackRock CEO Larry Fink

The Federal Reserve will disappoint markets by cutting interest rates just one more time in 2024, BlackRock CEO Larry Fink said.

Fink said the Fed will likely cut interest rates by 25 basis points before the end of the year amid a rise in global inflation.

“I think it’s fair to say we’re going to have at least a 25, but, that being said, I do believe we have greater embedded inflation in the world than we’ve ever seen,” Fink said during a Tuesday panel in Riyadh, Saudi Arabia.

The market sees two more cuts this year, pricing in a 25 basis point cut at the November and December meetings, according to CME’s FedWatch tool. Investors see slimmer odds of about 30% that the Fed will leave rates unchanged in December.

Fink pointed to inflationary policies in the US, which he said are changing the economy’s consumer-driven nature.

“We have a government and policy that is much more inflationary. Immigration — our policies of onshoring, all of this — no one is asking the question ‘at what cost,'” he said. “Historically we were, I would say, a more consumer-driven economy, the cheapest products were the best and the most progressive way of politicking.”

His comments point to the policies aimed at bringing supply chains closer to the US and “re-shoring” domestic manufacturing jobs via spending bills like the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

Those measures will likely mean inflation sticks around and prompts the Fed to pause its easing cycle, Fink suggested.

“Today, I think we have governmental policies that are embedded inflationary, and, with that being said, we’re not gonna see interest rates as low as people are forecasting.”

The latest inflation reading for September showed the consumer price index grew 2.4% year over year, down slightly from 2.5% in August, according to data from the U.S. Bureau of Labor Statistics.

After Fink’s comments, another panel at the conference reaffirmed his forecast. When asked to raise their hand if they expected the Fed to cut interest rates twice more before the end of the year, the CEOs of Goldman Sachs, Morgan Stanley, State Street, and other Wall Street giants kept their hands down, according to CNBC.

The central bank kicked off its easing cycle with a jumbo 50 basis point cut last month.

This week will be important for the Fed’s decision-making process, with a slew of data releases scheduled, including personal consumption expenditures, third-quarter GDP, and the October jobs report.