April 14, 2024
Head of world’s largest asset manager says this is why Fed will struggle to bring down inflation

Head of world’s largest asset manager says this is why Fed will struggle to bring down inflation

“‘I believe interest rates are going to be higher for longer…I believe inflation is going to be stickier for longer. In other words I think we’re going to have a 4%-ish floor on inflation.’”

— Larry Fink, BlackRock Inc.

That’s BlackRock Inc. BLK, +3.07% Chairman and CEO Larry Fink arguing that global “fragmentation” and reshoring of supply chains means policy makers will struggle to bring inflation down to the Federal Reserve’s 2% target.

In an interview with CNBC, Fink blamed geopolitical issues, with a decadeslong process of globalization giving way to “fragmentation.”

“If we want to have national security for food, national security interests for chips and energy, no one is asking the essential question, ‘at what cost?’” Fink said.

“Much of this has to do with why I believe inflation to be higher. This might be the right outcome for national security, I’m not making a value judgment,” Fink said. But investors and policy makers have yet to grapple with the implications of the cost of such a shift, which is likely to make inflation stickier for longer, he said.

Fink spoke after the world’s largest asset manager delivered first-quarter earnings that beat Wall Street analyst estimates, although its profit and assets under management fell. BlackRock shares were up over 3% near midday Friday.

U.S. stock indexes were lower as investors weighed upbeat earnings from major banks, a fall in retail sales and remarks by several Fed officials. The Dow Jones Industrial Average DJIA, -0.42% was down 236 points, or 0.7%, while the S&P 500 SPX, -0.21% shed 0.5% and the Nasdaq Composite COMP, -0.35% lost 0.9%.

See: Jamie Dimon discourages use of term ‘credit crunch’ on call with analysts

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