①Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, believes that the Federal Reserve should cut interest rates again in December rather than next year; ②He pointed out that inflation is cooling, and the labor market is softening due to productivity improvements driven by artificial intelligence. The pain from interest rates is primarily felt among small businesses, low-income borrowers, and housing.
Cailian Press reported on November 5 (edited by Huang Junzhi) that Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock and a potential successor to Federal Reserve Chair Jerome Powell, stated that the Federal Reserve should cut interest rates again in December rather than next year. He also elaborated on why the market has already signaled the need for a rate cut.
He believes that inflation is cooling, and the labor market is unstable. He noted that the labor market is quietly softening due to productivity improvements driven by artificial intelligence. Meanwhile, the pain caused by interest rates is most evident in the hardest-hit areas: think of small businesses, low-income borrowers, and housing.
Rick Rieder is a senior executive at BlackRock, currently serving as the Chief Investment Officer (CIO) of the Global Fixed Income division. He is also a Senior Managing Director at BlackRock, responsible for managing the company's fundamental fixed income business and global allocation investment team.
In addition, he actively manages the iShares Flexible Income Active ETF (BINC) and was awarded the 2023 Outstanding Portfolio Manager Award by Morningstar. Ried oversees a platform with nearly $2.4 trillion in assets under management, making his insights on economic conditions almost impossible to ignore.
Recently, he has also been considered a potential successor to Federal Reserve Chair Jerome Powell, which makes his comments on interest rate cuts even more noteworthy.
Reasons for a December Rate Cut?
As Rieder put it, “One thing I’ve learned from the market is that you have to interpret what the market is saying.” For him, this serves as a reminder that the data is actually 'whispering' — the Fed’s next move is long overdue.
First, inflation is no longer what it used to be. Rieder’s view on inflation is straightforward: raising interest rates cannot solve all problems.
“In which areas is inflation difficult to reverse? Healthcare, insurance, and education,” he said. “It is quite challenging to make interest rates beneficial for healthcare, insurance, and education. Therefore, whether the Fed raises or lowers interest rates as it pleases, these costs are unlikely to change because they are not related to borrowing.”
However, overall, the situation appears relatively calm: 'The six-month core PCE… is around 2.5%,' and 'the five-year breakeven inflation rate is 2.5%.' Therefore, inflation is cooling rather than resurging, and the broader market seems content with this development.
Moreover, Reid’s warning pertains to employment rather than economic growth.
Reid pointed out that artificial intelligence and automation are boosting output while reducing headcount, especially in high-demand sectors like data centers. He remarked, 'You don’t see many people… what you do see is massive capital expenditure, and productivity is exploding everywhere.'
'While this is good for profit margins, it is much harder on workers,' he added.
In summary, Reid maintains that, excluding healthcare, employment growth is actually negative, meaning a potential interest rate cut in December looks more like relief than a risk.