BlackRock’s Rick Rieder still expects a Fed rate cut in September, but conviction not high

Rick Rieder is BlackRock’s chief investment officer of global fixed income. He spoke with Dow Jones / Market Watch in an interview ahead of today’s Federal Open Market Committee (FOMC) meeting.

Like many, he expects the FOMC’s Summary of Economic Projections (SEP), its “dot plot”, to show two rate cuts expected in 2024, down from 3 projected at the March SEP update. Redier does add, though, that 2 is a “very close call’, saying FOMC members are mixed in the outlooks, and only 1 cut in the projections is possible.

Reider expects the market is likely to “react moderately positively” to projections for two rate cuts

• yet “still with a skeptical eye as to whether they will really be able to get that done”
• will probably view such a projection as “aspirational on the part of the Fed”
• will question whether “they have enough time to get the two cuts in” this year

Given the statements we’ve had from Fed officials prior to the blackout, wanting to see a run of lower inflation data before cutting, I think Reider is correct on ‘is there enough time?’ question on 2 cuts for the remainder of this year.

Further out:

• “I think the first cut would come in September”
• “the conviction around it happening can’t be that high”
• sees the longer-run rate may “ultimately head to above 3%”, citing deglobalization and spending in areas such as artificial intelligence and infrastructure as creating some stickiness in inflation that leads that rate higher

On Powell’s presser:

• “I don’t think [Powell] is going to be dovish in the press conference”
• believes Powell will “say we can wait longer” to cut rates

Ahead of the Federal Open Market Committee (FOMC) statement and Federal Reserve Chair Powell’s press conference due on Wednesday, 12 June 2024

• at 1400 and 1430 US Eastern time respectively (1800 and 1830 GMT)

are US CPI data for May 2024.

• due at 0830 US Eastern time (1230 GMT)

Goldman Sachs forecasts US May Headline CPI @ 3.4% y/y, core 3.5%

This article was written by Eamonn Sheridan at www.forexlive.com.