Blackrock CEO Expects 2 Rate Cuts This Year; Warns About Inflation

Blackrock CEO Larry Fink has said that he expects the US Federal Reserve will likely cut rates only two times this year. The prediction is quite contrary to the market’s earlier prediction of three rate cuts this year. Fink’s idea had come at a time when recent CPI data had also already created a dilemma about the rate cut trajectory.

Blackrock CEO Predicts Two Rate Cuts

According to reports, Larry Fink, the CEO of BlackRock, stated that he believes the Federal Reserve will only lower interest rates twice this year and that it will be challenging for the government to control inflation.

When the inflation rate hits 2.8% to 3%—below the Fed’s target of 2%—Fink will “call it a day and a win,” the CEO said to CNBC on Friday following the asset manager’s first-quarter earnings.

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Investors Try Understanding Rate Cut Timing

Blackrock CEO’s statement comes at a time when the financial markets are already trying to understand the Fed’s rate cut trajectory. Market players had bet on three rate cuts this year as of December 2023. The assumptions, however, have been completely overturned by data points suggesting otherwise, with conflicting signals suggesting that the first-rate cut would take some time.

As of right now, the odds for a rate cut in June or July have been discarded. Investors are still holding out hope for September, though, as the CME FedWatch Tool indicates that there is a more than 45% chance of a September rate cut.

Blackrock CEO’s Projection Stands Contrary to Others

Blackrock CEO, Larry Fink’s rate cut projection currently stands a little contrary to other financial institutions. According to the most recent projection from Goldman Sachs, there will be three rate reductions this year, with the first one taking place in June. They also intend to make one cut in 2026 and four in 2025. According to their estimates, terminal interest rates will lie between 3.25 and 3.5%.

Investors have historically given the Federal Reserve’s rate choices a lot of weight when evaluating assets. Lower interest rates typically result in the loss of value of government securities, which increases the allure of bitcoin and other cryptocurrency assets. The decision by the Fed to delay rate reduction may cause investors to decide to temporarily hold onto traditional assets, which has caused market volatility for cryptocurrencies. Even better, a robust economy sustains high investment demand.

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