BlackRock says the Federal Reserve could hike interest rates to a peak of 6%

World’s largest asset manager believes the U.S. federal funds rate will peak at 6% after Fed Chair Jerome Powell warned interest rates are likely to rise sooner than expected. “We think there’s a reasonable chance that the Fed will have to bring the Fed Funds rate to 6%, and then keep it there for an extended period to slow the economy and get inflation down to near 2%,” BlackRock’s chief investment officer of global fixed income Rick Rieder wrote in response to Powell’s testimony before the Senate Banking Committee on Tuesday. The economy is more resilient than expected, according to Rieder, who cited the most recent jobs report as well as the consumer price index. “This is partly due to the fact that today’s economy is no longer as interest-rate sensitive as that of past decades, and its resilience, while a virtue, does complicate matters for the Fed,” he wrote in the note.

Despite BlackRock’s call for a rate of 6%, Morgan Stanley economists stated that Powell’s comments opened the door to a return to 50 basis point hikes. During February, the central bank raised rates by 25 basis points, bringing the federal funds rate to a range of 4.50% to 4.75%. The probability of a half-point hike moved to 73.5% in Asia’s Wednesday afternoon, according to the CME Group’s FedWatch tracker of fed funds futures bets. A 50 basis point hike would bring the rate to a range of 5% to 5.25%. The Federal Reserve is slated to meet March 21-22.

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