Inflation Is Cooling. But is 2% Out of Reach?

• Markets experienced relief as CPI numbers were not higher, with core CPI trending lower (1.6% over 6 months, 2.4% excluding shelter).
• Rieder believes the Fed's 2% inflation target is a long-run objective, and current levels (core PCE around 2.8% by year-end, 2.5% next year) are 'in the ballpark'.
• He questions the effectiveness of raising overnight rates and suggests using the balance sheet to manage the long end of the yield curve.
• Fiscal burdens and immense supply of financing (including AI-related capital expenditures) are pushing real rates higher globally.
• Current fixed income environment offers attractive yields (e.g., ~6.80% for A-minus rated bonds with <3-year duration) without needing to stretch for risk, favoring high yield, emerging markets, and securitized assets.

BlackRock's Rick Rieder discusses the latest CPI report, noting market relief despite inflation remaining above the Fed's 2% target. He believes the economy is 'in the ballpark' for inflation normalization, suggesting that raising overnight rates may be less effective than other tools like the balance sheet. Rieder highlights attractive opportunities in fixed income due to high real rates and fiscal burdens.