Two rate cuts this year? BlackRock CIO optimistic on easing inflation.


During the recent disclosure of the U.S. Consumer Price Index for March, most investors in the market have adopted a pessimistic attitude towards interest rate cuts, even believing that there might not be any rate cuts within this year.

Discussions about the Federal Reserve cutting interest rates have been very heated in recent months. Up until a few months ago, the common viewpoint was that there would definitely be a rate cut this year, with the debate centering more on how many cuts would occur and in which months. However, after the Consumer Price Index (CPI) for March was released, there was an uproar in the market, with some even beginning to discuss the possibility of a rate hike.

Faced with stubborn inflation, investment banks and analysts have had to change their views, starting to debate the possibility that there might not be any rate cuts within this year. This possibility aligns with the opinions of several high-ranking officials from the Federal Reserve, who have come forward to imply that there will be no rate cuts this year, and the existing policy will be maintained until inflation eases.

However, Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, holds a different opinion. He believes that the Federal Reserve will indeed cut rates this year, and by two times, since inflation will soon ease, and after its easing, the Federal Reserve will make the difficult decision to cut rates.

Reider also mentioned that BlackRock has already begun to shift its investment focus, now more towards short-term bonds. The advantage of short-term bonds is that they do not have to bear the fluctuations related to long-term investments, which means they believe that policies will undergo changes after some time.

This opportunity for change could be varied, possibly following the announcement of new employment and inflation data, or after the U.S. elections.



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Interest rate cut

A rate cut refers to the central bank adjusting the interest rate level so that it is lower than before, as a form of monetary policy. It is a means by which the central bank affects the supply and demand relationship in the money market, money creation, and the level of interest rates by changing the level of interest rates. Rate cuts are usually used to counter inflation, stimulate economic growth, or alleviate economic downturn pressures.

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