Rieder Sees Inflation Peaking, Predicts Economic Deceleration

BlackRock's chief investment officer of global fixed income and head of the global allocation investment team, Rick Rieder, believes that inflation is peaking and will come down within the next few months. He thinks core Personal Consumption Expenditures (PCE) inflation will decrease to mid-2% from its current 3.3%. Rieder attributes this optimism to a productivity revolution, where companies are improving logistics, inventory management, and customer procurement.

The sectors that have kept inflation high include healthcare, education, insurance, and shelter, which are not interest rate-sensitive and less economically cyclical. According to Rieder, raising rates won't help bring down prices in these areas, as it would require sending the economy into a recession.

Rieder expects another hike this year from the Federal Reserve but believes that the economy will decelerate and inflation will come down, particularly if the war subsides. He also thinks that US Treasury's buyback plan is having some effect in curbing rising yields, although it's hard to prove its success.

Rieder likes long-end Japanese government bonds for the first time in a while due to the Bank of Japan's disposition towards hiking rates. He also likes European credit and emerging markets, where inflation is coming down. In addition, he finds investment-grade credit in the US attractive, particularly with solid levels of credit quality.