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Top Asset Manager Says Federal Reserve May Continue Hiking Interest Rates to 6%

The world’s largest asset manager, BlackRock, has weighed in on the subject of interest rate hikes by the US federal reserve. According to BlackRock, upcoming federal reserve decisions are likely to see the rates increase by almost 6%. Per a CNBC report, the prediction follows a recent testimony by the Federal Reserve Chair, Jerome Powell. Speaking before the Senate Banking Committee on Tuesday, Powell warned that it is looking more likely that interest rates will go higher than the central bank initially projected.

Agreeing with Powell, BlackRock’s chief investment officer, Rick Rieder believes that more hikes remain the only way to manage the current state of the economy. He also sees the continued hike as the only way to reduce inflation to the barest minimum. Rieder wrote partly:

“We think there’s a reasonable chance that the Fed will have to bring the Fed Funds rate to 6%, and then keep it there for an extended period to slow the economy and get inflation down to near 2%.”

Rieder also noted that the present-day economy is more resilient than the federal reserve has ever had to deal with. He highlighted the fact that today’s economy no longer has a similar sensitivity to interest-rate hikes as it did some decades ago. Hence, the reason why the issue remains a tough one for the Fed to crack.

As expected, Powell’s recent commentary has drawn a lot of attention, and experts are expecting larger hikes. For example, just as BlackRock forecasts a terminal rate of 6%, Morgan Stanley economists also believe that Powell’s testimony will necessitate bigger hikes of at least, 50 basis points.

Last month, the central bank raised rates by 25 basis points to bring the rate to about 4.50% or thereabout. However, with high expectations of a 50 basis points hike, the rate will be somewhere in the range of 5% to 5.25%.

Therefore, anticipation is in full gear for the next Federal Reserve meeting slated to take place between March 21-22.

Top Asset Manager Says Federal Reserve May Continue Hiking Interest Rates to 6%

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