One of Wall Street's biggest money managers has called on the Federal Reserve to rein in its program of quantitative easing, saying its bond-buying tactics are a "large and dull hammer" that have distorted markets and risk stoking inflation.
Rick Rieder, who oversees $763 billion in fixed income investments for BlackRock, spoke out as the Fed debates how long to persist with the unorthodox measures it has used to stimulate the U.S. economy. His comments add BlackRock to the growing list of Fed critics who are warning of trouble ahead for the bond market.
BlackRock has been an advocate of government debt in recent years, in comparison to the shrill voices that delivered premature warnings of higher rates. Mr. Rieder's shift comes as the asset manager pushes clients towards investments with less sensitivity to the effect of higher interest rates than long-dated bonds.
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Mr. Rieder favors government debt that matures within five years, corporate and emerging market debt, and bank loans that offer floating interest rates.
"Fed policy has had a distorting effect on capital allocation decisions of all kinds at virtually every level of the economy," he told the Financial Times. "It is a very large and dull hammer for markets."
The Fed buys $85 billion of Treasurys and mortgage-backed securities every month, about two-thirds of the net issuance of such bonds.