BlackRock’s fixed income chief, Rick Rieder, believes that although the Federal Reserve has the ability to stop raising interest rates, it is unlikely to do so. Rieder spoke at CNBC’s Delivering Alpha conference and stated that investors should expect at least one more rate hike before the end of the year, as indicated by the central bank officials. He expressed his disagreement with the decision, citing that the data suggests a pause is warranted. Rieder acknowledged the need to trust the Fed’s stated intentions when making investment decisions.
The Federal Open Market Committee (FOMC) recently decided not to raise rates but hinted at a possible 25 basis point increase before the end of 2023 in their forecast. If the FOMC follows through, this would mark the twelfth rate increase since March 2022. Rebecca Patterson, the chair of the Council for Economic Education, noted that penciling in another rate increase provides the Fed with options but does not commit them to a specific path. The Fed’s higher-for-longer stance has created challenges for investors, leading to volatility in stocks and increased bond yields. Rieder shared his preference for commercial paper as a low-risk investment option with solid income potential.
While Rieder anticipates the Fed will eventually start cutting rates, he believes this is unlikely to occur until the second half of 2024. Fed officials have indicated the possibility of a half percentage point reduction next year.