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September 09, 2015 at 08:13 AM
If it were up to BlackRock’s Rick Rieder, he says he would have upped interest rates three to six months ago.
On the cusp of a Federal Open Market Committee meeting next week that may or may not include a decision to raise rates for the first time in almost 10 years, Rieder talked to CNBC’s “Squawk Box” on Tuesday about his thoughts on interest rates.
“Can the Fed move? We think they could have moved three [to] six months ago,” the chief investment officer of fundamental fixed income at BlackRock, who oversees more than $740 billion in assets under management, told CNBC.
He explained why he thinks it’s time for higher interest rates.
“It’s not only a 0% funds rate,” he said. “If you assume the Fed has $4.5 trillion in the balance sheet, you have an effective funds rate well below 0%. That’s not the right level given what growth is in the economy, given where we’re going. So do we think [the Fed] could go? We think they could go. We think they should go and arguably should have gone a little while ago.”
Rieder’s views are strikingly different from another well-known bond guru, Jeffrey Gundlach, who does not think rates should be raised.
Rieder, though, doesn’t see a rate hike as all that scary.
“It’s hard to assess how [Gundlach is] thinking about it,” Rieder told CNBC. “I will say, we’re talking about historically low interest rates and, I will say, when people talk about, ‘The world’s going to come to an end if we get rates up 25-50 basis points.’ It’s very important to think about – people compare this to different cycles and think about when the Fed tightened policy – you’re talking about a Fed that’s going to be extremely gradual, you’re talking about a Fed that if growth doesn’t keep up they’re going to slow down the process. It’s not that scary.”
While some are worried about what effect raising interest rates in the U.S. could have on the rest of the world, Rider said the U.S. benefits from the quantitative easing and easy policies in the rest of the world today.
