Investors Brace For Disappointment As BlackRock's Larry Fink Predicts Single Rate Cut This Year

Investors should buckle up as BlackRock CEO Larry Fink tempers market expectations for Fed action in the year ahead. Fink recently stated that the Fed might only deliver a single 25 basis-point cut in 2024 – tempering market hopes for two rate reductions by year-end. Speaking at an economic panel, he pointed out the unusual persistence of global inflation, compounded by U.S. policies like onshoring and inflationary spending, Business Insider reported.

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The market has been pricing in rate cuts at the November and December meetings, banking on the Fed's recent aggressive cuts, including a 50 basis-point drop in September. But Fink's view reflects a deep concern over inflation lingering due to ongoing policy shifts. He said today’s government priorities lean inflationary, with recent spending bills, such as the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, bolstering the long-term demand for domestic goods, pushing inflation upward.

During the Riyadh panel, Fink questioned these inflationary costs, suggesting that while the U.S. has focused on reshoring, inflation is becoming "embedded." He argued the American economy has morphed from a "consumer-driven" model into one now rooted in inflation-inducing policies, likely stalling any major rate relief. According to Fink, rate cuts might be fewer and slower, keeping inflation under more restrictive Fed policies. “We have a government and policy that is much more inflationary. Immigration – our policies of onshoring, all of this – no one is asking the question ‘at what cost,'” he said during the panel, as quoted by BI.

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Fink's outlook wasn't just about rate cuts but broader inflationary pressures. With September's consumer price index showing a slight drop to 2.4% year over year, Fink believes the path to lower inflation is complicated by the government's fiscal policies, which are designed to stimulate the economy but carry long-term inflationary risks. As data releases loom this week, including the October jobs report and third quarter GDP numbers, markets will get a clearer picture of the Fed's next move. 

As more CEOs weighed in, Fink's predictions gained further backing. Key industry leaders from Goldman Sachs, Morgan Stanley and State Street seemed aligned with this outlook, with none signaling expectations for multiple Fed rate cuts this year. Fink's comments precede a busy data week for the Fed, with critical reports on personal consumption, GDP and the jobs market that could further impact decision-making.

In all, Fink's words are a reality check, warning that low rates aren't guaranteed and that inflationary policies could mean tighter financial conditions well into 2025. For investors, this prompts them to reassess strategies as hopes for aggressive cuts give way to a more cautionary outlook.

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