- BlackRock CIO Rick Rieder urged the Federal Reserve to lower interest rates to stabilize housing costs and ease financial strain on borrowers.
- Pressure on Fed Chair Jerome Powell is mounting as policymakers and traders anticipate potential rate changes despite strong economic indicators.
- CME FedWatch data suggests a 95.9% probability of unchanged rates, dampening expectations of a cut during the upcoming July meeting.
BlackRock Chief Investment Officer Rick Rieder has added momentum to calls for a Federal Reserve rate cut ahead of the upcoming FOMC meeting. In a Bloomberg interview, Rieder stressed that high borrowing costs are weighing on households and the housing market.
Rider added that with existing rates, refinancing is no longer an attractive option, which causes a slowdown in construction and increased home prices. According to him, a decrease in the rates would stimulate home construction and reduce prices as well as release the inflationary potential.
Market Sentiment and Economic Data
As the U.S. economic indicators are very healthy, Rieder is still of the opinion that a cut can still be made. The market expectations changed, with traders reducing bets of a rate cut in July because of the robust job growth data during the month of June. As proposed by Rieder, even a 3.25% rate will not go below the prevailing rates of inflation.
Jerome Powell, the Chief of the Federal Reserve, is confronted with a ramping up of criticism regarding the hawkishness of the central bank. The current policy has strained the economy, claiming that Powell should have reduced the rates, as stated repeatedly by U.S President Donald Trump. The Federal Reserve representatives, among them Waller Christopher and Mary Daly, are also alluding to the possibility of rate changes in the year 2025.
The Market Odds Are Low on Optimism
According to the CME FedWatch tool data, there is not much market confidence of a near-term cut. Chances are high (95.9% likelihood) that rates would be maintained at between 4.25 and 4.50%, and the likelihood of a cut in rates to the range of 4.00 to 4.25% is at 4.1%.
To make matters worse, Representative Anna Paulina Luna has referred Powell to the criminal department over the reason that he has lied about statements he made before the Senate. The move may raise further consistency around the decisions made by the central bank with the FOMC meeting round the corner.
Markets are hung on to the result of the July meeting as calls to reduce the rate keep increasing. Due to economic and political tension, investors are keenly watching over what the Fed will do next.
