Global investment firm BlackRock believes that markets’ bets on Federal Reserve interest rate cuts are “overdone”. Investors have voiced expectations of rate cuts of a combined 100 basis points over the course of next year, pricing a 68% chance of this happening. This is a rise from just 37% a month ago according to the CME FedWatch tool.
“That is really aggressive,” BlackRock Investment Institute global chief investment strategist Wei Li responded during a media roundtable. “So we do think that the Fed will cut rates, probably in the second half of next year, but how many cuts they will deliver will be quite a bit less compared with the old economic cycles, old recessions.”
Jean Boivin, the head of the BlackRock Investment Institute, noted that too much investor confidence has been spurred by comments made by Federal Reserve officials. While many expected an economic recession to hit the US later in the year, the opposite was true, with consumers increasing spending at a more aggressive pace than expected, leading to an economic expansion.