Rick Rieder, BlackRock’s chief investment officer for global fixed income, is sticking with his call for a jumbo rate cut from the Federal Reserve next month after new inflation data showed less-than-expected price pressures. “We expect the Fed to begin cutting rates in September, and it could be justified cutting the Funds rate by 50 basis points, to get it more aligned with longer-term inflationary expectations and some of the productivity enhancement we are seeing across multiple industries,” Rieder said Tuesday in a note to clients. (1 basis point equals 0.01%.) A half-point cut in September would mirror the Fed’s move in September 2024 when it began the easing cycle with a big rate reduction. His comments came after data showed the consumer price index increased a seasonally adjusted 0.2% for the month and 2.7% on a 12-month basis. The year-over-year rise was softer than a Dow Jones estimate of 2.8%. Rieder, a widely followed investor on Wall Street, had brought up the possibility of a half-point cut after July’s jobs report released Friday signaled a dramatic slowdown in the labor market. BlackRock manages $3.1 trillion in fixed income assets on behalf of clients. “Today’s inflation report was a bit stronger than we have seen over the prior few months, but lower than many have feared,” Rieder said. “We are still heartened by the trajectory of some core areas of inflation that are running at lower levels than in the prior few years.” Excluding food and energy, the core CPI increased 0.3% for the month and 3.1% from a year ago, compared with the forecasts for 0.3% and 3%. The monthly core rate was the biggest increase since January while the annual rate was the highest since February.
