[Financial News] Jerome Powell, the Chair of the U.S. Federal Reserve, held a press conference at the Federal Reserve Building in Washington on the 30th of last month. BlackRock’s Chief Investment Officer (CIO), Rick Rieder, predicted on the 12th that the Federal Reserve could reduce interest rates by 0.5% at the September meeting, considering the low inflationary pressures in the U.S.
BlackRock’s Rick Rieder has raised the possibility of a 0.5% interest rate cut. In an analysis note sent to clients on the 12th, Rieder stated that U.S. inflationary pressures were confirmed to be weaker than expected, suggesting that the Federal Reserve could opt for a larger-than-usual rate cut at the September meeting.
There is an expectation that at the Federal Open Market Committee (FOMC) meeting on the 16th-17th of next month, the Federal Reserve might take a “big step” by cutting rates by 0.5% instead of the usual 0.25%.
The U.S. Department of Labor’s Bureau of Labor Statistics (BLS) announced on the same day that the Consumer Price Index (CPI) for July showed that President Donald Trump’s tariffs were not significantly pressuring inflation yet.
The year-on-year increase rate of the core index was 3.1%, higher than the market forecast of 3.0%, but the overall index increase rate was 2.7%, 0.1 percentage points lower than expected by the market.
As a result, expectations that the Federal Reserve will cut rates next month were reinforced, leading to record highs in the New York stock market.
In his analysis note, Rieder mentioned that the Federal Reserve might start cutting rates in September, and that a 0.5% decrease in interest rates could be justified. He explained that this would align the Federal Reserve’s monetary policy stance with long-term inflation expectations and some productivity improvements due to the introduction of artificial intelligence (AI).
Previously, the Federal Reserve embarked on a new rate-cutting path last September with a 0.5% cut, followed by additional 0.25% cuts in November and December.
Rieder’s scenario for a 0.5% rate cut for the next month was presented on the 1st. At the time, amid shock in the market from the BLS’s U.S. July employment trends report, Rieder argued that Trump’s tariffs were impacting the U.S. economy, making a 0.5% rate cut by the Federal Reserve instead of the usual 0.25% appropriate.
He assessed that the CPI confirmed that inflationary pressure is not as high as thought, allowing for more room for the Federal Reserve’s actions.
Rieder pointed out that although the CPI showed some strength compared to previous months, it was lower than many had feared, emphasizing that the core CPI was lower compared to past years.
Meanwhile, the financial markets expect the Federal Reserve to implement three rate cuts this year.