- ORIGINAL NEWS
Time is running out for interest rate cuts, market forecaster Jim Bianco warns before Fed meeting
- SUMMARY
As the Federal Reserve prepares for its policy meeting, there’s speculation about whether it will cut interest rates.
However, Wall Street forecaster Jim Bianco believes the central bank is unlikely to make any changes until after this year’s presidential election, even if the data warrants it.
Bianco argues that the economy is performing well and inflation is stabilizing, not warranting rate cuts.
With the economy’s current strength, Powell would have to observe a significant economic downturn to consider lowering rates.
Moreover, Bianco notes that the Fed has repeatedly stated the need for confidence in achieving its target inflation rate of 2%, which is not currently attainable.
As a result, Bianco believes Wall Street is becoming aware that the window for further rate cuts is narrowing.
Market data also reflects this sentiment.
Expectations for a rate cut in June have fallen below 50%, and Treasury yields are on an upward trend, approaching their highest point in four months.
Bianco anticipates yields may rise even further due to persistent inflation.
In Bianco’s view, the 10-year Treasury yield could reach 5.5% this year, a level last seen in 2001.
He attributes this to the economy’s resilience in handling higher interest rates in the past.
While this viewpoint may not align with market consensus, Bianco emphasizes the importance of considering the reality of inflation’s impact on yields.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
“It’s in a ‘no landing phase’ as we like to call it.”
“It’s not a Boeing plane. There’s no parts falling off of it, and it’s just continuing to move along at probably a 2.5% to 3% pace.”
Negative
“The window for interest rate cuts may be closing.”
“For Fed Chair Jerome Powell to cut this spring, the economy would have to dramatically weaken,”
“It looks like we’re probably bottoming on inflation at around 3%”
“That’s not 2[%], and the Fed has made it very clear that they need confidence for going to 2[%]. And, we’re not getting that.”
“The 10-year yield would hit 5.5% this year.”
“It’s a level not seen since May 2001.”