Blackstone CFO Chae states US inflation is 'on target'

Blackstone Inc. Chief Financial Officer Michael Chae said the firm is "cautiously optimistic about a soft landing," indicating the alternative asset manager is betting the Federal Reserve's efforts to jam inflation won't trigger a US recession.

"Soft landings are hard to land," Chae said Wednesday at the Barclays Global Financial Services Conference. "They're pretty rare in history - but where we sit today looks pretty encouraging."

A mixed picture of inflation in Bureau of Labor Statistics data has set the stage for a more gradual pace of rate cuts. The core consumer price index, excluding energy and food costs, rose 0.3 per cent last month from July, the most in four months, new BLS data showed. Still, overall CPI eased for a fifth straight month, climbing 2.5 per cent from a year earlier, according to a report by Bloomberg.

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According to Chae, Blackstone's own gauge of inflation-shelter costs out and other metrics put that measure at 1.7 per cent. That would make the US "at target" for inflation, he said.

Wall Street generally expects the Fed to cut interest rates after a series of raises that started in March 2022, though such expectations commonly rest on CPI numbers and job statistics. Blackstone also digs into the data from its far-reaching portfolio, which covers real estate, buyouts, and financing.

Data from Blackstone, the world's largest alternative asset manager, suggest labour markets have been softening, according to Chae. Chief executives of Blackstone portfolio companies said they expect wage growth to moderate in the coming year, according to a June survey.

While there's "decelerating revenue growth" across Blackstone's global portfolio, those businesses have shown "resilient margins," Chae said.

The finance chief also sprinkled optimism about a deal comeback after a years-long drought.

“We’re seeing signs of the return of animal spirits in the transaction market,” Chae said. “If these trends hold, I think that could, in particular, lead to a pretty robust 2025.”