BlackRock’s Rieder Says Fed Could ‘Exaggerate’ With Rate Hikes

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(Bloomberg) — Friday’s US jobs report showed an economy strong enough to allow the Federal Reserve to raise interest rates to curb inflation. Rick Rieder of BlackRock says don’t overdo it.

“The Fed needs to be careful about tightening up,” the chief investment officer for global fixed income at BlackRock (NYSE:) Financial Management Inc. to Bloomberg Television’s The Open. “We are moving in the right direction. We are slowing down.”

Companies increased hiring by 261,000 in October, which was more than expected, and average hourly wages accelerated from September, according to a Labor Department report Friday.

But the unemployment rate rose to 3.7% from a more than five-decade low, payroll gains were the smallest since late 2020, and annual income growth plunged below 5% for the first time since last year.

The takeaway for financial markets is an employment sector that is cooling, albeit not very quickly. That matches Jerome Powell’s characterization earlier this week, when the Fed chairman acknowledged that conditions have not yet eased in an “obvious” way and said the central bank is targeting a higher peak interest rate than two months ago.

Rieder said he sympathizes with the Fed “offsetting an inflation shock,” with consumer prices rising at the fastest pace in four decades this year. The central bank has raised its fund rate from nearly 0% in March to a range of 3.75%-4%, moves that Rieder says have been “brilliant” in slowing the economy to the point where inflation will decline.

But the Fed is dealing with “an economy that is functioning reasonably well. You close the income gap. And wages will start to fall,” he said. Interest rates “moved a historic amount. You see it in the housing market. These are historic declines when it comes to the activity rate in the housing market.”

The press conference

At a news conference on Wednesday, after the Fed raised overnight interest rates by 75 basis points for the fourth consecutive time, Powell said, “Incoming data since our last meeting suggests the final level of interest rates will be higher than previously expected.”

“I wish people would understand our commitment to getting this done and not making the mistake of not doing enough or the mistake of withdrawing our strong policies and doing it too soon,” he told reporters.

“The press conference, that was the thing that blew me away,” Rieder said. “The Fed has been too easy for too long. Now we’ve had the most historic series of rate hikes while liquidity has been drained. I don’t think we should be turning the boat from side to side.”



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