Larry Fink: Fed Rate Cuts Won't Meet Market Expectations

BlackRock CEO Larry Fink has expressed skepticism about market expectations for Federal Reserve interest rate cuts, stating that the Fed will not reduce rates as much as anticipated. Fink's views on embedded inflation, government policies, and economic growth have shaped his perspective on the Fed's rate-cutting cycle.

Fink believes that embedded inflation, driven by various factors, will prevent the Fed from implementing aggressive rate cuts. Immigration policies, which have led to higher wages for American workers, contribute to this embedded inflation. Fink noted that "governmental policies that are embedded inflationary" will limit the Fed's ability to lower interest rates significantly.

Government policies such as the Inflation Reduction Act and the Infrastructure Investment and Jobs Act have also contributed to embedded inflation. These policies aim to boost domestic jobs and manufacturing, which can lead to increased prices for goods. Fink highlighted that these policies are more inflationary than deflationary, further limiting the potential for substantial rate cuts.

Fink's perspective on the consumer-driven economy and politicking also influences his assessment of embedded inflation. He noted that historically, the focus was on providing the cheapest products, but today, there is a shift towards prioritizing domestic jobs and manufacturing. This change can contribute to higher prices and embedded inflation.


Fink's views on embedded inflation differ from other market participants who have forecasted two additional rate cuts by the end of 2024. He predicts only one rate reduction this year, citing the high level of embedded inflation. Fink's perspective is that immigration policies and onshoring initiatives contribute to inflation by increasing labor costs and prices for goods.

Fink's comments on government policies align with the Fed's inflation management strategies. The Fed has been monitoring inflation closely and has implemented a 50 basis point rate cut in September. However, Fink believes that the market's expectations for rate cuts are overestimated, with traders pricing in a roughly one-in-three chance of another 50 basis point cut in November.

The potential implications of Fink's views on inflation for the broader investment landscape are significant. Investors should consider the impact of embedded inflation on various sectors and asset classes. As Fink suggests, the Fed may not cut interest rates as much as expected, which could influence bond yields and stock market performance. Additionally, the continued growth of the economy, as Fink predicts, may have positive implications for certain sectors and investments.