Money markets are pricing in too many interest-rate cuts by the Federal Reserve and dismissing the risks of higher inflation, said BlackRock in a note.
“We lean against market pricing of four to five quarter-point rate cuts by the Fed this year,” it said.
BlackRock expects the world to move toward higher borrowing costs than before the Covid-19 pandemic as incoming tariffs push inflation higher. “We think plans for a new wave of U.S. tariffs and responses from other countries reinforce that we will be in a world where interest rates—and long-term bond yields—stay higher than pre-pandemic,” it noted.