BlackRock, the $9 trillion asset management firm, says the Federal Reserve’s interest rate cuts will likely not be as big as the market expects. With the economy performing well and inflation remaining high, the Fed may not be able to cut rates that much, BlackRock Investment Institute wrote in a note on Monday.
The Federal Reserve will decide this week whether to cut interest rates. interest rate First interest rate cut in four years. The US has been fighting a tough battle against inflation since the end of the coronavirus pandemic, a fight that temporarily led to a year-long string of monthly rate hikes. But the Fed is now expected to finally make its first rate cut after keeping rates on hold all summer.
BlackRock wrote that such a large rate cut reflects overdone recession fears and expectations of a sustained decline in inflation, which will likely only subside temporarily. “As the Fed prepares to begin cutting rates, markets are pricing in rate cuts as big as those seen in past recessions. We believe these expectations are overdone,” the investment house added.
“It is clearly time for the Fed to lower interest rates,” Democratic senators wrote in a letter to Fed Chairman Jerome Powell on Monday. “In fact, it may be too late. Your delay has endangered the economy and made the Fed obsolete.”
BlackRock says interest rate cuts not as big as expected
Black Rock The firm maintains that the U.S. economy is growing strongly. It says that significant interest rate cuts will not be needed to further improve the economy. “Inflation and policy rates will remain elevated over the medium term due to the impact of structural changes, including an aging workforce, continued fiscal deficits, and geopolitical polarization,” the firm’s note said. The firm maintains a focus on U.S. stocks due to its optimistic view on the impact of artificial intelligence.
The Federal Reserve’s upcoming interest rate cut will have a strong impact on the US market and cryptocurrencies. Further inflation declines and interest rate cuts are desperately needed amid the current US economic turmoil. However, how drastic the cut will be remains up for debate until the end of the week. Some experts have expressed similar concerns to BlackRock, saying that a significant rate cut is premature. There is a growing view that a significant rate cut risks further plunging the market into crisis. Thus, the final decision will be crucial for the immediate future of the US. A significant rate cut could unsettle banks across the US, causing stock prices and cryptocurrencies to fall further.
