BlackRock’s Rick Rieder: Half-Point Fed Rate Cut in September Is Now a Real Possibility

Washington, D.C. – A senior voice from the investment world has weighed in on where U.S. interest rates could head next. Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, said this week that the Federal Reserve could take the unusual step of cutting interest rates by 50 basis points as soon as September, citing signs of slowing growth and labor market softness.

The comment comes as the Fed walks a tightrope between keeping inflation in check and responding to signs that the U.S. economy may be losing momentum.

Fed May Move Faster Than Expected

The Fed held interest rates steady at its last policy meeting, but Rieder believes new economic data could justify a more aggressive approach.

“If job creation continues to weaken and inflation remains stable, a 50 basis point cut is certainly on the table,” Rieder said during a financial briefing on Thursday.

Recent labor market reports show slower hiring, with only 73,000 jobs added in July and unemployment ticking up to 4.2%, the highest since 2022. In response, markets have started to price in higher odds of a substantial rate cut.

Market Reaction and Policy Outlook

The idea of a larger-than-usual rate cut would mark a notable shift from the Fed’s typical 25 basis point moves. But some analysts say it may be justified.

“The Fed needs to remain flexible,” said Amrita Shah, economist at Eastern Capital. “Inflation is no longer the main threat, a sudden economic slowdown might be.”

The Fed’s next meeting is in mid-September. By then, fresh inflation and employment figures will give policymakers more clarity.

Chair Jerome Powell has remained cautious in public remarks, saying the Fed will watch the data closely before committing to any move.

External Pressures and Global Trends

Beyond domestic numbers, the Fed also faces international challenges. Ongoing trade tensions, especially involving tariffs on Chinese imports, are complicating forecasts. There is also increased geopolitical uncertainty linked to energy markets and the conflict in Eastern Europe.

Meanwhile, other central banks, including the European Central Bank and Bank of Canada, have already started easing policy in response to global growth concerns.

Financial Industry Preparing for Lower Rates

Large investors are already adjusting. Bond yields dropped on Friday, with the 10-year Treasury yield falling below 3.75%, its lowest in two months. Equity markets have shown mixed reactions, as investors weigh rate cuts against weakening corporate earnings.

If the Fed goes ahead with a half-point cut in September, it would be the most aggressive easing step since the early days of the COVID-19 crisis in 2020.

“This could be the beginning of a more accommodative cycle,” said Rieder. “The Fed doesn’t want to be late to the game.”