BlackRock CIO Rick Rieder Predicts December Fed Rate Cut Despite Uncertainty From Chair Jerome Powell

The chief investment officer of the world’s biggest asset manager believes the Federal Reserve will continue cutting interest rates next month.

In a new interview with Yahoo Finance, BlackRock CIO Rick Rieder says that despite some members of the Federal Open Market Committee (FOMC) leaning more towards a pause on rate cuts, another cut is still more likely given the mounting evidence that inflation is under control.

“I think it will happen. But listen, one thing that I’ve learned about markets is that you have to interpret what they’re saying. There is a part of this committee that definitely would lie to wait and evaluate the data. I think they can go, I think they should go, I think they can go quicker, but I respect that inflation is running a little higher. If you take 6-month core PCE you’re running at about 2.5%, other metrics, you’re running closer to 3%.

My only view is that it is not an infectious inflation expectation dynamic that allows the Fed to move. In fact, in the market today, you can buy 5-year inflation breakevens at 2.5%. It’s not like the market thinks that inflation is a problem. Such that I think the window is there. I have a stronger view that I think labor is the tricky thing from here and I think there is significant displacement in labor that we’re going to see over the next couple of years…”

Rieder says he’s generally optimistic on the US economy, but not so much when it comes to the job market, given the rise of artificial intelligence. He’s anticipating continued weakness in labor alongside an AI-boosted productivty wave.

“It’s not just AI that’s creating this burning activity. It’s things around inventory management, logistics, client procurement, predictive maintenance… Productivity is exploding everywhere. It means you see it in all the corporate earnings. Companies are doing well, the revenues are decent, the cost of goods sold is coming down, their SG&A (Selling, General, and Administrative Expenses) is coming down, you can operate with a lower cost threshold.

That’s why you’re seeing M and A (mergers and acquisitions) that’s so high. ‘I’ve gotta get bigger, I’ve gotta vertically integrate, I’ve gotta use data, I’ve gotta use AI, and I don’t need as much fixed infrastructure, including people.”