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The window for interest rate cuts may be closing.
Ahead of the Federal Reserve’s two-day policy meeting, Wall Street forecaster Jim Bianco believes the central bank will likely remain on hold until next year.
“I’m in favor of the Federal Reserve not changing its policy in the summer of an election year,” the president of Bianco Research told CNBC’s “Fast Money” on Monday. “If they don’t pull the trigger by June, then it will be November (or) December at the earliest, only if the data justifies it. And, right now, the data doesn’t justify it.”
For Federal Reserve Chair Jerome Powell to cut rates this spring, the economy would have to weaken dramatically, according to Bianco.
“The economy is too strong right now,” he said. “It’s in a ‘non-landing phase,’ as we like to call it. It’s not a Boeing airplane. It doesn’t have any parts falling off and it just keeps moving forward probably at a rate of 2.5% to 3%.”
This week’s Federal Reserve meeting comes almost exactly two years after policymakers began their rate-hike campaign.
“It looks like we’re probably bottoming out with inflation around 3%,” he said. “That’s not 2(%), and the Federal Reserve has made it very clear that they need confidence to get to 2(%). And we’re not going to understand it.”
It seems that Wall Street may be on notice. He CME FedWatch Tool showed on Monday that expectations for a quarter-point rate cut in June fell below 50%.
Additionally, Treasury yields are rising. The reference point 10-Year Treasury Bond Yield is yielding 4.328%, its highest level in a month and inching closer to a four-month high.
“They may even go higher,” Bianco added. “It’s going to be the reality of inflation.”
In January, Bianco told “Fast Money” that the 10-year bond yield would reach 5.5% this year. It is a level not seen since May 2001.
He still believes that the context will maintain the upward trend in performance.
“I don’t think it’s a consensus opinion in the market,” Bianco said. “When we were at 5% in October, we were delivering 3% growth rates in the economy, and we were able to manage that level of interest rates very well.”
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