BlackRock Inc. Chief Executive Officer Larry Fink says he sees the highest U.S. inflation in recent memory as more than a transient phenomenon. He backed up that view with a blanket raise for employees.
The world’s largest asset manager will increase the base salaries of all staff at the director level and below by 8%, starting in September, according to a memo he and the firm’s president Rob Kapito issued Wednesday, coinciding with the company’s second-quarter earnings release.
Historic monetary and fiscal stimulus helped the U.S. economy rebound from the depths of the Covid-19 crisis. That recovery has also bolstered BlackRock, which had about $9.5 trillion under management at the end of June. Shares fell 3.3% to $877.85 at 11:27 a.m. in New York.
A giant in indexed products, the company saw its exchange-traded funds exceed the $3 trillion threshold in the second quarter for the first time as investors continued to pile into buoyant global markets.
The policy response has also raised concern that the world’s largest economy could overheat. The U.S. consumer price index surged 5.4% in June relative to a year earlier, and core CPI, which excludes food and energy, jumped by the most since November 1991.
Fink said in an interview with Bloomberg following the company’s earnings release that inflation will bring about “epic change,” and though that’s not necessarily a cause for concern just yet, it’s not as transitory as some market strategists have assumed, either.
“Government policy is more focused on domestic jobs than the cheapest prices today, and I do believe that that will be one of the fundamental changes,” Fink said. “Companies are focusing on their employees more, and I do believe you’re going to see more wage growth that will be above trend line.”
BlackRock is joining a widespread bidding war on Wall Street for younger workers as the firms compete to attract and keep talented employees. Earlier this month, Citigroup Inc. lifted base salaries to $100,000 for first-year analysts, joining the likes of Barclays Plc, JPMorgan Chase & Co. and Guggenheim Partners.
Powell’s View
Meanwhile, Federal Reserve Chair Jerome Powell indicated inflation is likely to remain high in coming months and that the central bank doesn’t plan to scale back its asset purchases yet, in remarks prepared for the House Financial Services Committee on Wednesday.
Fink said the possibility that inflation could persist at as high as 3.5% poses questions for central bankers about historically easy monetary policy and their bond-buying programs.