‘I worry about inflation. I do not believe inflation is going to be transitory.’
Larry Fink, who runs BlackRock Inc.
the world’s largest asset manager, isn’t convinced by the Federal Reserve’s arguments that U.S. inflation pressures will fade away once supply bottlenecks and other temporary factors resulting from the COVID-19 pandemic fade away.
In an interview with CNBC, Fink said there have been important “fundamental” and “foundational” changes around the way policy makers view inflation. A decades-long emphasis on keeping prices low for consumers has been supplanted by concerns about wage levels and jobs.
For its part, BlackRock also plans to bump up all employees’ base salaries by 8%, effective in September.
BlackRock on Wednesday reported second-quarter profit and revenue that rose above expectations, as assets under management increased 30% to $9.5 trillion and net inflows topped $80 billion. Shares were down more than 3% Wednesday morning.
On Tuesday, the U.S. June consumer-price index rose more than expected, jumping by 0.9%. The rate of inflation in the 12 months ended in June climbed to 5.4% from 5%. The last time prices rose that fast was in 2008, when oil hit a record $150 a barrel.
Federal Reserve Chairman Jerome Powell, in testimony prepared for delivery before a congressional panel, on Wednesday once again said that he thinks the sharp rise in inflation seen so far this year will dwindle away.
Fink isn’t the only Wall Street chief sounding unconvinced by the Fed’s expectations for inflation pressures to prove “transitory.” JPMorgan Chase & Co.
Chief Executive Jamie Dimon has said the bank is sitting on an extra cash cushion in anticipation of higher rates and more inflation.
U.S. stocks were nudging higher Wednesday, with the Dow Jones Industrial Average
up 70 points, or 0.2%, while the S&P 500
gained 0.3% and the Nasdaq Composite
Inflation jitters aside, Fink remained upbeat on the outlook for the stock market.
“I’m not trying to suggest that it’s going to be a straight-line upward, and there could be disappointments going forward. But overall, with the amount of fiscal stimulus and monetary stimulus, and more importantly with the amount of cash that is looking to be put to work, I believe the trend line is still going to be upward,” he said.