BlackRock sees ‘reasonable chance’ of Fed raising rates to 6%

NEW YORK (Reuters) – The U.S. Federal Reserve could raise interest rates to 6% and keep them there for an extended period of time to fight inflation, said Rick Rieder, chief investment officer of global fixed income at BlackRock, the worlds largest asset manager.

Federal Reserve Chair Jerome Powell told U.S. lawmakers on Tuesday that the U.S. central bank could become more aggressive in its rate hike path following recent strong economic data.

“We think theres a reasonable chance that the Fed will have to bring the Fed Funds rate to 6%, and then keep it there for an extended period to slow the economy and get inflation down to near 2%,” Rieder said in a note on Tuesday.

The Feds policy rate is currently in the 4.50%-4.75% range.

As of December, officials saw that rate rising to a peak of around 5.1%, a level investors expect may move at least half a percentage point higher now.

Goldman Sachs said in a note on Tuesday that it had raised its forecast for the so-called terminal rate by 25 basis points to a range of 5.5%-5.75%.

Bets on the Federal Reserve more aggressively hiking rates have gained more traction in money markets in recent weeks, after a string of economic data showing a tight job market and inflation remaining high. That data revived fears the Fed may resort once again to the same super-sized interest rate hikes that hammered stocks and bonds last year.

Traders had largely expected the central bank to raise rates by 25 basis points at its next rate-setting meeting on March 21 to 22, but after Powells remarks on Tuesday Fed funds futures were pricing in a 50 basis points hike, CME Group data showed.

(Reporting by Davide Barbuscia; Editing by Anna Driver)