Don't put all your faith in the Fed with a March 2024 rate cut still unlikely, BlackRock bond guru says

• The Fed is unlikely to start slashing interest rates in March, according to BlackRock's Rick Rieder.
• Stocks surged after Jerome Powell seemed to signal that the central bank is done fighting inflation.
• “I don’t think chair Powell meant to be that aggressive about starting to cut this quickly,” Rieder told Bloomberg TV.

The Federal Reserve is unlikely to start cutting interest rates in March despite investors' euphoric reaction to comments made by chair Jerome Powell last week, according to BlackRock bond guru Rick Rieder.

Powell seemed to signal on Wednesday that the central bank would likely slash borrowing costs sooner than markets had previously expected. Traders are now predicting that monetary policymakers will start easing in March and cut rates five times in total in 2024, according to the CME Fedwatch tool.

Powell said: "The question of when will it become appropriate to begin dialing back the amount of policy restraint in place – that begins to come into view, and is clearly a topic of discussion out in the world and also a discussion for us at our meeting today."

Stocks climbed higher off the back of his comments, with both both tech giant Apple and the Dow Jones Industrial Average hitting fresh all-time highs – but that surge could prove premature, Rieder warned Monday.

"I thought what was most interesting about Powell was there was no pushback on financial conditions easing, which was pretty stark contrast to where they were a couple of weeks ago, with no reference to still fighting inflation aggressively," he told Bloomberg TV's ETF IQ.

"But then markets took it dovishly, including pricing in that the Fed would start cutting in March, which I still think is early," Rieder, who's the global CIO of fixed income for the world's largest asset manager, added.

Rieder's view clashes with the more bullish outlook being pushed by big US banks like Goldman Sachs, whose strategists revised up their 2024 prediction for the S&P 500 on Monday.

But the BlackRock bond chief's comments came on a day where yields on 10-year US Treasury notes ticked up around 4 basis points, which he said was a sign investors were starting to rethink Powell's apparent dovishness.

"I don't think chair Powell meant to be that aggressive about starting to cut this quickly, so I think today's retrenchment makes some sense to me," Rieder told Bloomberg.