BlackRock CEO Larry Fink told investors Tuesday. It would be a mistake to think that the Fed will cut rates significantly later this year because billionaire money men believe the U.S. economy will continue to grow.
Mr. Fink dismissed market expectations for further rate cuts through the end of the year after Powell cut interest rates by 0.5 percentage points two weeks ago.
This is the first cut since 2020 and a larger-than-expected reduction as Western economies emerge from the aftermath of the global coronavirus pandemic.
“I think there is certainly room for further easing,” the head of a major investment company that manages at least $9 trillion in assets said in an interview on Bloomberg TV.
“I think we're seeing more inflation-prone policies from more governments. With that in mind, it's hard to see short-term rates dropping another 200 basis points.”
If Fed officials cut interest rates by 200 basis points (bp) between now and the end of 2024, that would cut interest rates by 2 percentage points from the current 4.75% to 5% level.
Economists have already pointed to Friday's jobs report as key data that could change the Fed's policy direction.
If the unemployment rate rises significantly or employment stagnates, authorities could consider further significant rate cuts later this year.
Fink added, using the term to refer to an economic slowdown or stagnation that could eventually slide into recession.
“We're going to continue to grow. There are parts of the economy that are struggling. There are also segments that are doing very well,” he said. “We will grow at 2-3%.
The interest rate cuts are aimed at lowering borrowing costs for businesses and households, allowing them to spend more freely in the hope of spurring economic growth.
But overly aggressive cuts could inject too much money into the economy and reignite inflation (the rise in prices of goods and services over time).
Fink, the founder of the world's largest asset management firm, pointed to strong corporate earnings as a sign that the U.S. economy is in better shape than some commentators suggest.
He also harshly criticized major U.S. companies that still have large operations in China, citing the Chinese government's support of Russia by increasing oil and gas supplies.
“I'm surprised there aren't bigger questions and demands when Ukraine is right under our noses here. You're supporting our enemies,” the top billionaire said. told Bloomberg. “It's got to be costly.”
Mr. Fink has an estimated net worth of $1.2 billion, according to Forbes, and is a longtime donor to the Democratic Party.
BlackRock has been a vocal supporter of the Biden administration's policies on environmental and social governance (commonly known as ESG) in recent years.
This is a practice that encourages major companies and investors to keep climate change in mind as part of their business models, but also encourages diversity on corporate boards.
Mr. Fink has clashed in recent months with fellow Wall Street titan Boaz Weinstein, whose Saba Capital Management launched activist raids on a series of BlackRock funds this year.
Saba, which has significant stakes in at least 10 funds, claims that BlackRock's mismanagement is hurting the funds' profitability.
Mr. Weinstein's investment firm currently manages about $5 billion in assets.
