BlackRock's Rick Rieder says a half-point rate cut by the Fed in September is possible

CNBC

4 days ago

Rick Rieder, BlackRock's chief investment officer for global fixed income, said July's dismal jobs report opened the door for a jumbo rate cut from the Federal Reserve next month. "We would argue that the evidence the Fed needed in order to justify a cut in September has arrived in today's report," Rieder said in a note to clients Friday afternoon. "If slack in the labor force builds at all, or we continue to see a below 100,000 jobs hiring rate persistently, we would expect the Fed to start moving rates lower, and a 50-basis point cut in September might be possible depending on how the data evolves." A half-point cut next month would mirror the Fed's move in September 2024 when it began the easing cycle with a big rate reduction. His comment came after data showed U.S. labor market suffered a sizable slowdown in the past few months. Payrolls increased only by 73,000 in July, much lower than a Dow Jones estimate for a gain of 100,000. To make the matter worse, the totals in the prior two months were revised down by nearly 260,000 combined. Following the weak report and the dramatic revisions, futures traders hiked the odds of a cut at the September meeting to about 83%, up from 40% on Thursday, according to CME Group data . Still, while Rieder entertained the possibility of a half-point cut next month, futures market currently assigns zero chance of it. "Today's report provides the evidence the Fed needs to make a September interest rate adjustment, so the only question is how large that will be," Rieder said. BlackRock manages $3.1 trillion in fixed income assets on behalf of clients. The Fed kept its benchmark interest rate in a range of 4.25% to 4.50% earlier this week, with two members disagreeing with the move. Fed Chair Jerome Powell said there has been no decision made on how the central bank will proceed at its September meeting, adding that policymakers must wait and see the effect of tariffs before they proceed.