BlackRock goes against Wall Street consensus in calls for Fed interest rate cuts

BlackRock is calling for rate cuts. While most of Wall Street wants the Federal Reserve to keep rates steady or deliver minimal easing, BlackRock’s Rick Rieder says the central bank needs to start cutting now.

Rieder, who serves as Chief Investment Officer of Global Fixed Income at BlackRock, made the case in a Bloomberg TV interview, arguing that interest rates are damaging low-income Americans and stalling broader economic potential.

“The service economy is what drives this economy today,” Rieder said. “It’s not a goods-oriented economy, not commodities, not exports, not manufacturing.”

According to the Bloomberg interview, he believes that since most of the economy is now service-based, it has become resistant to rate-driven slowdowns in goods. That, he says, makes the old way of targeting inflation through aggressive hikes less effective, and more harmful in the wrong places.

Rieder explained that today’s interest rates are hitting one part of the economy especially hard: housing.

“The real impact of interest rates on the economy today… it’s about housing,” he said. And that impact, he explained, is falling on the shoulders of low-income borrowers. “People that borrow today are lower-income and they’re adversely impacted, infected, by where these rates are.”

He argued that lowering rates would allow for more housing construction and better affordability. “If we get the rate down, you actually can bring home prices down. You build more houses, you’ll actually reduce inflation,” Rieder said.

Despite the economy performing well on the surface, he sees rate cuts as consistent with managing the inflation outlook. He pointed out that inflation break-evens are currently between 2.5% and 2.75%, while the Fed funds rate could be cut to 3.25% and still stay above that level. “I think we got plenty of room to drop it,” he said.

BlackRock bets on AI, crypto, and stablecoins while waiting for Fed to act

Rieder said the only long-term path out of the U.S. debt problem is to grow faster than the debt itself. “There’s only one way to de-lever the economy. You’ve got to outrun the debt. You got to outgrow it,” he said. He said a combination of GDP growth between 4.5% to 5% and a drop in interest rates to 3% could help, though it would take time.

On the tech side, Rieder leaned heavily into artificial intelligence as a future growth engine. “People underestimate how dramatic this is gonna be,” he said. He tied AI, robotics, cloud, software, energy, and cooling into one broad theme of accelerated productivity.

“Our world a year or two hence is gonna see things that nobody’s ever seen before,” he said. AI-driven automation will create lower-cost services, improve business efficiency, and change how companies operate entirely.

“It doesn’t have to be necessarily the Mag 7,” Rieder added. He believes companies that use data effectively, whether they’re retailers, media platforms, or tech firms, are best positioned. “The companies that utilize data to expand their mode… how they advertise, how they run their business efficiently using software,” are the real winners.

Rieder still favors large-cap growth stocks and tech. “I still believe in growth, in technology and equities,” he said. He also supports balancing portfolios with small amounts of gold or crypto.

On crypto, Rieder made it clear he owns some personally. He didn’t go into detail on amounts, but said it’s held in “moderate size.”

More importantly, he called stablecoins a key part of the future financial system. “Stablecoin, I actually think will be quite helpful,” he said. “It will soak up some of the Treasuries… not a tremendous amount, but some.” He also said stablecoins will help with global dollar use and with tokenized payments and investments.

Rieder ended by calling the global crypto adoption rate “extraordinary.” Despite volatility, he sees it as a growing part of the economy that investors will have to deal with, like it or not.

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