Larry Fink predicts that the Fed will not lower interest rates as much as markets anticipate in the upcoming year.

• Blackrock's CEO anticipates only one interest rate reduction this year, in contrast to the two cuts predicted by other market participants.
• Fink stated that while he believes we'll have at least a 25 basis-point cut, he also thinks we're experiencing greater embedded inflation than ever before.
• The Fed cut its benchmark rate by 50 basis points in September.

Larry Fink, CEO of Blackrock, stated on Tuesday during a panel in Riyadh, Saudi Arabia that the U.S. Federal Reserve will not lower interest rates as much as markets anticipate due to "embedded inflation" being too high.

Fink, who manages a massive fund worth over $10 trillion, predicts only one interest rate cut this year, in contrast to the two reductions forecast by other market participants.

At the Future Investment Initiative in Saudi Arabia, Fink stated that while he believes we'll have at least a 25 basis-point cut, we also have more embedded inflation than ever before.

Our government and policies are more inflationary, and we have not considered the cost of our immigration policies. Historically, we were a consumer-driven economy, where the cheapest products were the best, and the most progressive way of politicking.

Fink's mention of onshoring emphasized the U.S.'s recent efforts to reduce reliance on foreign supply chains and invest in domestic jobs, particularly in manufacturing. The Biden administration's legislation has furthered these efforts. However, these changes may result in higher prices for goods, as American workers are typically paid more than those in offshore manufacturing destinations like China.

Fink stated that governmental policies are inflationary, so interest rates will not be as low as people predict.

The Fed cut its benchmark rate by 50 basis points in September, indicating a shift in its management of the U.S. economy and its outlook for inflation. Reports from strategists at J.P. Morgan and Fitch Ratings in late-September predicted two more interest rate cuts by the end of 2024 and expect such reductions to continue into 2025.

In September 2023, the U.S. Bureau of Labor Statistics reported that America's consumer price index, a crucial inflation indicator, increased by 2.4% compared to the same month in 2022. Although this figure is a slight decrease from the 2.5% increase recorded in August, it still represents a slowdown in price growth. Notably, the September reading was the smallest annual increase since February 2021.

The panel at the event, featuring CEOs from Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street, was asked if they believed the Fed would implement two additional rate cuts this year. Not a single hand was raised in response.