BlackRock's Rieder says the Fed should begin rolling back 'extreme policy accommodation' as inflation data comes in hotter than expected

• BlackRock's Rick Rieder doubled down on his stance the Fed should start pulling back on ultra-accommodative policy.
• Rieder said Thursday's inflation data shows prices are overwhelmingly high.
• He said the Fed will be better served fulfilling its mandate if it begins discussing tapering.

BlackRock's Rick Rieder doubled down on his stance that the Fed should consider rolling back its accommodative policy stance after key inflation data came in hotter than expected on Thursday.

CPI rose 5% year-over-year in May, higher than the consensus estimate of 4.7%. May Core CPI, which excludes volatile food and energy components, came in at 0.74% month-over-month and 3.8% year-over-year, well above the consensus forecast and driven higher by used vehicle prices.

The BlackRock chief investment officer of global fixed income said the data is just the latest sign that certain parts of the economy don't have sufficient product inventory to supply the demand at current prices.

The Federal Reserve has suggested that some of the price gains are transitory, and therefore it will not be changing its policy stance until there is sustained inflation. Rieder, who is also the head of the BlackRock global allocation investment team, said that framework may need to change.

"Ongoing adherence to the newly minted Average Inflation Targeting (AIT) framework in the face of a torrid 2021 economic recovery that is visibly supply constrained, risks upending the very stability that the AIT framework claims to seek to achieve," Rieder said.

The Fed would be better served in fulfilling its mandate to begin to discuss the tapering of asset purchase and to attempt to avoid the " destabilizing influences that can result from excessive use of extreme policy accommodation," he added.

Rider also said the inflation data out today is an "overwhelming" sign that prices are moving too high in some areas as demand grossly outpaces supply.

"In our view, the pursuit of inflation merely for inflation's sake poses a very real problem: That problem is that inflation in daily necessities is disproportionately felt by lower-income cohorts," said the CIO.

In an interview with CNBC on Monday, he said he is confident that the market is ready for the Fed to taper its asset purchases and remove "excessive emergency conditions" that have become a market risk.