(Bloomberg) — Laurence D. Fink, the head of the world’s largest asset manager, said governments need to embark on fiscal stimulus to boost the economy, joining a growing chorus of investors who say the world has relied on monetary policy for too long.
Monetary policy has “run out of runway,” with some central banks pushing interest rates into negative territory, Fink said Wednesday in an interview with Erik Schatzker on Bloomberg Television. He called the Bank of Japan’s negative rate policy an “outright mistake” and warned that without fiscal measures, the outlook would be “grim.”
“If we continue to have a dependency on monetary policy worldwide, I think it’s very grim,” said Fink, whose firm BlackRock Inc. oversees $4.7 trillion for clients. “We’re harming savers worldwide with low and negative interest rates.”
Fink’s comments echo those of top investors including Ray Dalio, head of the world’s largest hedge fund, and Bill Gross, the co-founder of Pacific Investment Management Co. Dalio said in February that the next step in policy would have to target spenders, rather than investors and savers, through measures that may include sending money to people directly. Gross has said for some time that fiscal measures were needed to supplement monetary policy.
While some countries, like Spain or France, don’t have room to increase spending, the U.S. and the U.K. are going to see an emphasis on fiscal measures, Fink said. Such stimulus would allow the U.S. Federal Reserve to start raising interest rates more aggressively, reducing the amount of money that consumers must set aside for future needs such as retirement and education. They could then spend more money on goods and services, spurring economic growth.
“If we see a path towards more fiscal policy and more investing in infrastructure going into 2017, we can see a second leg of the rally in equities, we can see monetary policy changing rapidly, and if that’s the case we could see rising rates faster than we forecast,” said Fink, who is chief executive officer of BlackRock. “They could modestly raise rates,” Fink said, which “would be very good for savers” and provide a boost to bank and commodity stocks, he added.
Fink forecast that the Fed will probably take a “pause” in raising interest rates this year, limiting such increases to 25 basis points in 2016. He added that the economy is not growing as fast as the Fed had expected.