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Fink sees low rates eroding growth as consumers focus on saving

By Mary Childs, Bloomberg

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(Bloomberg) — Low interest rates are prompting consumers to funnel more of their income into savings, potentially creating a drag on the U.S. economy, said BlackRock Inc.’s Laurence D. Fink.

Years of easy monetary policy have narrowed yields, depressing returns, said Fink, chairman and chief executive officer BlackRock, the world’s biggest asset manager.

“Therefore you have to save more today to get to that annuity stream,” he said at an investor conference in New York hosted by Deutsche Bank AG. While a higher savings rate helps Americans prepare for retirement, it “has a pronounced impact on global demand.”

Fink’s remarks to investors came in a conversation with Deutsche Bank co-CEO Anshu Jain, hours after Goldman Sachs Group Inc.

President Gary Cohn predicted his firm will manage more assets for insurers and pension funds contending with the impact of low interest rates. Fink predicted the Federal Reserve will raise its benchmark rate in September.

Fink has warned for years of a growing crisis from inadequate retirement savings in America. Recent figures on consumer purchases have been disappointing, and there’s evidence that savings rates are going up, showing “the fear of retirement is getting greater,” he said.

Aging consumers are “realizing that they have a totally inadequate strategy for retirement and living in retirement with dignity.”