World’s Largest Asset Manager Blackrock Predicts No Fed Rate Cuts This Year

The world’s largest asset manager, Blackrock, does not see the Federal Reserve cutting interest rates this year. “That’s the old playbook when central banks would rush to rescue the economy as recession hit. Now they’re causing the recession to fight sticky inflation – and that makes rate cuts unlikely, in our view,” said the firm’s strategists.

Blackrock, the world’s largest asset manager, published weekly commentary Monday explaining the state of the U.S. economy and why it does not see the Federal Reserve cutting interest rates this year.

While noting that “Markets have been quick to price in rate cuts as a result of the banking sector turmoil and the Fed signaling a coming pause,” Blackrock’s strategists wrote:

We don’t see rate cuts this year – that’s the old playbook when central banks would rush to rescue the economy as recession hit. Now they’re causing the recession to fight sticky inflation – and that makes rate cuts unlikely, in our view.

“Stocks have held up due to hopes for rate cuts that we don’t see coming. We think the Fed could only deliver the rate cuts priced in by markets if a more serious credit crunch took hold and caused an even deeper recession than we expect,” the strategists explained.

“Inflation is likely to prove even stickier than the Fed expects without a deep recession, in our view. The February U.S. CPI data confirmed our view that inflation is still not on track to settle at the Fed’s target,” they added.

The Blackrock strategists continued: “Recession is foretold as central banks try to bring inflation back down to policy targets. It’s the opposite of past recessions: Rate cuts are not on the way to help support risk assets, in our view.” They noted:

In the U.S., it’s now evident in the financial cracks emerging from higher interest rates on top of rate-sensitive sectors. Higher mortgage rates have hurt sales of new homes. We also see other warning signs, such as deteriorating CEO confidence, delayed capital spending plans and consumers depleting savings.

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