Rick Rieder, BlackRock’s chief investment officer of global fixed income, believes the Federal Reserve's monetary policy normalization process is on track and it has achieved 'price stability' despite its recent inability to meet its 2% inflation target.
The Citywire A-rated bond boss, who manages over $40 billion in assets, was speaking in response to Fed chairwoman Janet Yellen's congressional testimony on July 12, during which she reiterated her optimism about the health of the US economy.
‘The Fed is committed to continuing to normalize rate policy this year and to initiating balance sheet reduction, and we believe it is targeting three rate hikes for 2018,' said Rieder.
'Yet we must recognize that the Committee will move very deliberately and its composition will also be in flux over the next year (including the chair), so adjustments should be expected.'
Yellen added that forces holding down inflation will fade in the coming months, thus allowing the central bank to gradually increase rates.
Although she didn't rule out altering the rate increase path as economic outlook changes, Rieder thinks the Fed has been abundantly clear in laying out its policy path.
He added the Fed has effectively already reached its ‘price stability’ mandate in the context of secular demographic and technological trends, referring to factors such as just-in-time hiring, technology-driven job efficiencies, a lower goods-producing, high-wage workforce, and a rapid growth of temporary hiring.
The BlackRock global fixed income chief is also confident about the Fed’s ability to execute a September decision on initiating balance-sheet reduction, which would allow the agency 'a good deal more time to decide on a December rate hike after having begun its balance sheet reduction.'
Rieder joined BlackRock in 2009. He manages the $29.2 billion BlackRock Strategic Income Opportunities fund, $10.6 billion BlackRock Total Return fund, and the $158.1 million BlackRock Strategic Global Bond fund.