BlackRock Inc. Chief Executive Officer Laurence D. Fink said the U.S. Federal Reserve may not reduce its unprecedented assets purchases until as late as June following the political stalemate on the debt ceiling.
“It’s going to force the Federal Reserve to push off the tapering at the very least to March, but maybe as late as June,” Fink said today in an interview with Maria Bartiromo on the CNBC television network.
Fink, whose firm is the world’s largest money manager, with $4.1 trillion in assets, joins peers weighing in on when the Fed may start to taper, after unexpectedly refraining from doing so in September. Jeffrey Gundlach, CEO of DoubleLine Capital LP, said late last month that tapering wouldn’t happen until a new chairman replaces Ben S. Bernanke at the end of January. Bill Gross, co-chief investment officer of Pacific Investment Management Co., said today on CNBC that the Fed may not start to decrease purchases at its meeting later this month.
The Federal Open Market Committee held off tapering $85 billion in monthly bond purchases last month and indicated that budget cuts and increased borrowing costs were drags on economic expansion. Policy makers wanted to see more evidence of steady growth to combat 7.3 percent unemployment, they said in a statement.
Gundlach said during a conference call with investors Sept. 26 that the Fed has indicated a reduction of asset purchases will depend on economic data and it’s unlikely those numbers will improve sufficiently by the next meeting to warrant a reduction in purchases by October.
“It’s hard to believe the data will have such a monumental change in the next couple of weeks,” Gundlach said.
Rates on Treasury bills tumbled today and yields on government notes and bonds fell as lawmakers reached a tentative agreement to raise the nation’s borrowing capacity and remove the risk of default. Congress is poised to end the 16-day government shutdown and raise the U.S. debt limit after the bipartisan leaders of the Senate reached the accord.
Rates had risen to recent highs amid concern the U.S. may default on its debt or delay payments to debt holders if Congress was unable to agree on a plan to increase the debt ceiling by tomorrow’s deadline.
“The Fed ultimately has to end QE,” Gross said today on CNBC, referring to the bond buying that is also known as quantitative easing. “Their balance sheet won’t stand that burden for the next three or four years.”
Fink and Gross agreed at an event Oct. 3 that the U.S. budget standoff would be resolved without a debt default and that the U.S. is still the best place to invest.