BlackRock Inc portfolio manager Rick Rieder said that investors should look for the European Central Bank to withdraw some of its stimulus beginning early next year.
“We think at the next meeting they will announce a taper,” or a wind-down in the ECB bond-buying programme, said Rieder, global chief investment officer of fixed income at the world’s largest asset management company, which oversees $5.7 trillion (4.19 trillion pounds) in assets.
“That is the next thing to keep an eye on.”
Such an announcement would come at the same time as a historic shift by central bankers in the United States to unwind bond-buying quantitative easing programs they put in place to stimulate the economy after the 2007-2009 global financial crisis.
The Fed said on Wednesday it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities.
“It’s the right thing, and it’s historic,” said Rieder.
Rieder said interest rates are too low in the developed world and that the European economy could “absolutely withstand” tighter monetary policy, including somewhat higher rates.
Yet ECB policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters this month.
Rieder, who manages several portfolios at BlackRock, said he has been offloading longer-term government debt in developed markets in recent weeks but also buying agency-backed mortgage-backed securities, which he sees as reasonably priced “relative to other high-quality assets.”
Source: Reuters (Reporting by Trevor Hunnicutt; Editing by Richard Chang and Tom Brown)