© Reuters. FILE PHOTO: Larry Fink, Chairman and CEO of BlackRock, speaks during an interview with CNBC on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 14, 2023. REUTERS/Brendan McDiarmid
Written by Davide Barbuscia and Tom Sims
NEW YORK (Reuters) – BlackRock (NYSE) CEO Lawrence Fink said on Wednesday that inflation remains flat and the Federal Reserve may need to raise interest rates to contain price pressures.
Fink, who heads the world’s largest asset manager, said at A Deutsche Bank (ETR: Financial Services Conference expects at least two rate hikes by the Federal Reserve. But he downplayed the risk of a US recession, saying that if a recession does occur, it is likely to be modest.
“The Fed will have to be more vigilant. The economy is more resilient than the market realizes,” he said. However, Fink said there are “pockets of trouble” in the economy, such as the commercial real estate sector.
“I don’t see evidence that inflation is going down, or I don’t see evidence that we’re going to have a hard landing,” he said, referring to a scenario in which the Fed’s rate hike pushes the economy into deflation.
Fink said he expected a solution to the US debt ceiling crisis, but that the “drama” about raising the government borrowing limit had undermined confidence in the dollar.
A bill to raise the government’s borrowing cap is expected to win congressional approval over the coming days, ahead of the June 5 deadline indicated by the Treasury Department when the government will run out of cash to pay all of its obligations.
“I think we will have a decision… but let’s be clear, the United States is putting its reserve currency status at risk,” he said.
He said the protracted controversy over debt ceiling legislation, the risk of default in the US and the possibility of a credit rating downgrade were all “destabilizing” factors for the US dollar, the world’s leading reserve currency.
Fink said that in conversations with the heads of global central banks, questions were raised about there being too much risk and a focus on the US dollar.
“We are eroding some of that trust, which in the long term we need to correct and rebuild,” he said.