Blackrock Predicts No Rate Cuts from the Fed in the Current Year, Citing Economic Conditions

According to Blackrock, the world’s largest asset manager, the Federal Reserve is unlikely to cut interest rates this year. The reason being that in the past, central banks would lower interest rates to stimulate economic growth during a recession. However, this time around, they are trying to tackle sticky inflation, which makes rate cuts unlikely.

Even though the markets have already factored in potential rate cuts, Blackrock believes that it’s not likely to happen unless there is a severe credit crunch that causes a deeper recession than expected.

Blackrock’s strategists have observed that inflation is likely to persist unless there is a deep recession. Recent U.S. CPI data has confirmed that inflation is still not on track to settle at the Fed’s target. As a result, central banks are trying to bring inflation back down to policy targets by causing a recession. This is the opposite of past recessions, where rate cuts were used to support risk assets.

The effects of higher interest rates are already visible in the U.S. through financial cracks emerging in rate-sensitive sectors. Sales of new homes have been hurt due to higher mortgage rates. Additionally, there are other warning signs such as deteriorating CEO confidence, delayed capital spending plans, and consumers depleting savings.

In summary, Blackrock does not predict that the Federal Reserve will cut interest rates this year due to central banks’ focus on tackling inflation, which is likely to persist without a deep recession.