World's Largest Asset Manager Says Fed Could Take Rates To 6% and Keep Them There For Extended Period

Rick Rieder, the chief investment officer of global fixed income at the world's largest asset manager BlackRock BLK reportedly said the Federal Reserve could hike interest rates to 6% and keep them there for an extended period of time to rein in inflation.

“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 said in a note on Tuesday, according to a Reuters report.

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Major Wall Street indices lost over 1% on Tuesday after Fed Chair Jerome Powell indicated in his testimony before Congress that the central bank would be prepared to increase the pace of rate hikes if faster tightening seem to be warranted.

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said. “The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” he stated.

Price Action: The Dow Jones closed 1.72% lower on Tuesday entering negative territory on a year-to-date return basis while the yield on the 2-year Treasury notes surged to their highest since 2007 at over 5%.

The SPDR S&P 500 ETF Trust SPY closed 1.53% lower while the Invesco QQQ Trust Series 1 QQQ lost 1.23%.

According to the CME FedWatch Tool, 73.5% of traders are pricing in a 50 basis points hike by the central bank at its March policy meeting.

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