Blackstone’s CFO Chae Sees Soft Landing as Inflation Cools Faster Than Anticipated

Blackstone’s Chief Financial Officer, Michael Chae, expressed a “cautiously optimistic” outlook on the possibility of a soft landing for the economy, noting that inflation appears to be cooling more quickly than anticipated. Speaking at the Barclays conference, Chae acknowledged the uncertainty surrounding future economic conditions, stating, “We don’t have a crystal ball about where this goes, but we are cautiously optimistic about a soft landing.”

Chae shared insights from a Blackstone survey conducted in June, revealing that only about 14% of CEOs running the firm’s portfolio companies anticipate a recession within the next year. He emphasized the trends he’s observing, indicating both inflation and the economy are showing signs of cooling. Recent data revealed that the Consumer Price Index (CPI) for August rose by 2.5%.

The CFO believes that inflation is decelerating at a faster pace than expected, and he noted that the August CPI figures did not account for the recent slowdown in housing inflation, as shelter is a lagging indicator within the CPI. When excluding shelter, Chae estimates the year-over-year CPI for August is approximately 1.7%, highlighting the delay associated with the shelter component, which tends to rise and fall more slowly than other categories.

While discussions continue regarding the potential for Federal Reserve rate cuts, Chae pointed out that the direction of the 10-year Treasury rate holds greater significance for investors. He commented, “At the current kind of mid-3s level, mid- to high 3s area, that’s a pretty constructive context for the capital markets and for our business.”