BlackRock CEO Larry Fink said on Tuesday investors are wrong if they think the Fed will make massive interest rate cuts later this year because the billionaire money man believes the US economy will continue to grow.
Fink dismissed market predictions that rates will be slashed further through the end of year after Chairman Jerome Powell lowered them by half a percentage point two weeks ago.
It was the first reduction since 2020 and a bigger-than-expected cut as Western economies emerge from the aftermath of the global coronavirus pandemic.
“I do believe there’s room for easing more,” the boss of the investment giant that manages at least $9 trillion of assets told Bloomberg TV in an interview.
“I see more policies by more governments that tend to be more inflationary. With that in mind, it is hard for me to see another 200 basis points of a decline in short rates.”
A cut of 200 basis points by Fed officials between now and the end of 2024 would amount to a reduction of two percentage points from its current level of 4.75%-5%.
Economists are already pointing to Friday’s jobs report as a key piece of data that could alter the Fed’s policy path.
If the unemployment rate rises noticeably or hiring stumbles, officials could consider a sharper rate cut later this year.
Using a term for a slowing or stagnant economy that can eventually tip into recession, Fink added: “I don’t see any landing.
“We are going to continue to grow. There are segments of the economy that are struggling. There are segments that are doing really well,” he said. “We are going to grow at 2 or 3%.
Lower interest rates are aimed at making it less expensive for businesses and households to borrow and therefore spend more freely in the hope of boosting economic growth.
But overly aggressive cuts can pump excessive money into the economy, potentially stoking inflation – the rise in goods and services over time – once more.
Fink, the founder of the world’s largest asset manager, pointed to stronger corporate earnings as an indication that the US economy was in better shape than some commentators suggest.
He also took a dig at America’s corporate titans that were still doing extensive business in China because of how Beijing was supporting Russia by buying more of its oil and gas supplies.
“Ukraine is at our doorsteps here and I’m surprised that there’s not a larger questioning or demanding — you’re supporting our enemy,” the top money man told Bloomberg. “There should be a cost to that.”
Fink has an estimated net worth of $1.2 billion, according to Forbes, and is a longtime Democrat Party donor.
BlackRock has in recent years been a vocal cheerleader for the Biden Administration’s policies on Environmental Social Governance, more commonly known as ESG.
It the practice of encouraging major firms and investors to be mindful of climate change as part of their business models, but also encourage diversity in corporate boardrooms.
Fink has clashed in recent months with fellow Wall Street titan Boaz Weinstein whose Saba Capital Management has launched an activist raid on a series of BlackRock funds this year.
Saba, which has acquired sizeable stakes in at least 10 of the funds, contends that BlackRock’s mismanagement is depressing the funds’ profitability.
Weinstein’s investment firm has roughly $5 billion of assets under management at present.