The Federal Reserve is expected to continue raising interest rates despite market fears of a banking crisis, according to BlackRock.[0] The asset manager’s view is at odds with those of TD Securities and DoubleLine Capital, who anticipate that the Fed will not raise interest rates due to the increasing risk of recession.[1] BlackRock suggests that a more serious credit crunch or a stronger-than-expected recession is needed for the Fed to cut rates as much as the market is currently pricing in.[2] Small and medium-sized banks play a significant role in the US economy, accounting for roughly 50% of commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending, making the economy susceptible to any credit-driven issues.[3] Recent economic data indicates that inflation may persist for longer than previously expected, and as such, BlackRock expects a new, more nuanced phase of curbing inflation ahead, with less fighting but still no rate cuts.[1]
0. “Markets are wrong on US rate-cut bets, BlackRock says” The Edge Markets MY, 28 Mar. 2023, https://www.theedgemarkets.com/node/661059
1. “Markets are wrong on US rate-cut bets, BlackRock says” Moneycontrol, 28 Mar. 2023, https://www.moneycontrol.com/news/world/markets-are-wrong-on-us-rate-cut-bets-blackrock-says-10323881.html
2. “‘We Don’t See Any Fed Rate Cuts’: Blackrock Goes Overweight Inflation-Linked Bonds, Stays Underweight Stocks As …” Benzinga, 28 Mar. 2023, https://www.benzinga.com/analyst-ratings/analyst-color/23/03/31528042/we-dont-see-any-fed-rate-cuts-blackrock-goes-overweight-inflation-linked-bonds-stay
3. “The Fed now faces same destination — with a more treacherous path” Yahoo! Voices, 20 Mar. 2023, https://www.yahoo.com/news/the-fed-now-faces-same-destination-with-a-more-treacherous-path-160753639.html