The window for interest rate cuts could be closing.
On the eve of the Federal Reserve’s two-day policy meeting, Wall Street forecaster Jim Bianco expects the central bank will likely remain on hold until next year.
“My view is that the Fed doesn’t change policy in the summer of an election year,” the president of Bianco Research said on CNBC’s “Fast Money” on Monday. “If they don’t pull the trigger by June, then it’s November.” [or] December at the earliest – only if the data warrants it. And right now the data doesn’t justify it.”
According to Bianco, the economy would have to weaken dramatically for Fed Chairman Jerome Powell to cut interest rates this spring.
“The economy is too strong right now,” he said. “It’s in what we like to call a ‘no-landing phase.’ It’s not a Boeing plane. No parts of it fall off and it just keeps moving at a rate of probably 2.5 to 3%.”
This week’s Fed meeting comes almost exactly two years after policymakers began their rate-hiking campaign.
“It looks like we’ve probably bottomed out with inflation around 3%,” he said. “That’s not 2[%]and the Fed has made it very clear that it needs confidence to go to 2[%]. And we don’t get that.”
It looks like Wall Street may be taking notice. The CME FedWatch tool showed Monday that expectations for a quarter-point interest rate cut in June fell below 50%.
In addition, government bond yields are rising. The benchmark 10-year Treasury note yield The yield is 4.328% – the highest in a month and nearing a four-month high.
“Maybe they will go even higher,” Bianco added. “It will be the reality of inflation.”
In January, Bianco told Fast Money that the 10-year Treasury yield would reach 5.5% this year. It is a level that has not been reached since May 2001.
He still believes that this backdrop will tend to drive returns higher.
“I don’t think that’s a consensus view in the market,” Bianco said. “When we were at 5% in October, we increased the economy’s growth rate by 3%, and it was able to handle that interest rate level easily.”
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2024-03-18 23:51:48
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