BlackRock’s Rieder Says March Fed Rate Cut Hopes Are Premature

BlackRock’s Rick Rieder said that market expectations for the Federal Reserve to begin cutting interest rates in March are likely too early.

“Today’s retrenchment makes some sense to me,” the firm’s chief investment officer of global fixed income said on Bloomberg TV’s ETF IQ program Monday, as Treasuries sold off across the yield curve. The market action reflects the fact that Fed Chair Jay Powell didn’t intend to be “that aggressive about starting to cut this quickly.”

Rieder said he was surprised by Powell’s dovish tone during Wednesday’s FOMC meeting. For example, he didn’t reference that the central bank was aggressively fighting inflation.

Treasury yields plunged after Powell’s speech, with the yield on 10-year US Treasuries falling below 4% for the first time since August, while traders went all-in on pricing interest-rate cuts next year.

Meanwhile, several Fed officials have struck a less dovish tone in the wake of Powell’s speech. On Friday, John Williams said it’s too soon to start thinking about lowering borrowing costs as officials consider whether policy is restrictive enough to get inflation back to 2%.

Against this backdrop, Rieder said he’s underweight the front end of the yield curve and favors the middle or “belly” of the curve when the Fed does begin to pivot.