The President of Bianco Research believes that the Federal Reserve will not change its policy during an election year’s summer. He suggests that if a rate hike does not occur by June, it will likely happen in November or December only if the data justifies it. However, he indicates that the current economic data does not support such a move, as the economy is still performing strongly.
According to Bianco, the economy is in a ‘no landing phase’ and is growing at a rate of 2.5% to 3%, indicating that a rate cut would only be considered if the economy significantly weakens. As this week’s Fed meeting approaches, Wall Street seems to be taking notice, with expectations for a rate cut in June dropping below 50%. Treasury yields are also increasing, with the 10-year Treasury Note yield reaching its highest level in a month, standing at 4.328%.
Bianco remains steadfast in his belief that Treasury yields will continue to rise, even forecasting that the 10-year yield could hit 5.5% this year, a level not seen since May 2001. He emphasizes that this view is not commonly held in the marketplace, but he points to past economic growth rates of 3% handling higher interest rates effectively as evidence that the economy can withstand such levels.
