BlackRock discourages Wall Street’s rate expectations

The expectations and market bets regarding cuts to interest rates on the part of the Federal Reserve for next year have sparked intense debate among financial experts. So much Jerome Powellchairman of the Fed, as BlackRock they lower the foam to the enthusiasm that is in Wall Street.

In a scenario in which speculation and economic projections are commonplace, opinions diverge on the aggressiveness of these predictions.

Wei Li, chief global investment strategist at the BlackRock Investment Institute, cited by the international press, considers the current market expectations. In his opinion, although it is plausible that the body led by Jerome Powell will reduce rates over the next year, It will not be as drastic as is being projected..

Li warns of the risk of inflationary pressure if too aggressive cuts are implemented, which could result in excessive economic growth.

Increased spending by Americans, exceeding estimates, also contributed to the economic expansion in 2023, defying initial expectations of a possible recession. However, excessively lax monetary policy could lead to economic growth that deviates from the sustainable trend.

Jean Boivin, director of the BlackRock Investment Institute, highlights that much of the market fluctuations center on the comments of central bankers, underscoring the uncertainty in the economic framework and the unpredictability of the Federal Reserve’s actions. This situation, according to Boivin, generates great volatility, especially in the fixed income market.

BlackRock and the Fed bring down the heat on Wall Street

This way, BlackRock projects greater volatility in 2024 due to the uncertainty inherent in the post-pandemic economy. However, he refrains from predicting whether the US economy will enter a recession or experience a soft landing.

In that context, Powell dampened Wall Street’s enthusiasm and dismissed expectations of interest rate cuts in the first half of 2024, emphasizing the caution of the Federal Open Market Committee (FOMC).

Despite the fact that the cost of borrowing is at maximum levels, Powell believes that the possibility of adjusting monetary policy will remain. Likewise, he points out that it is premature andspeculate on when they could be made more flexible said policies, underlining the willingness to tighten them if necessary.

The Federal Reserve, at its next meeting, bwill seek to keep interest rates stablethus providing more time to evaluate the economy after the significant increases since 2022. In a landscape marked by uncertainty, the Fed appears to be taking a cautious and adaptive approach to the economic challenges ahead.