Strategist: The Federal Reserve should abandon its easing bias and shift to a tightening stance at the June meeting

ME News report. On May 18 (UTC+8), Ed Yardeni, President and Chief Investment Strategist of Yardeni Research, said that as investors become increasingly concerned about inflation, the Federal Reserve needs to keep pace with the bond market, otherwise it may face the risk of losing control over borrowing costs. He pointed out that, given the current market environment is “no longer” suitable for a dovish stance, the Fed should drop its dovish bias at the June meeting. “If the Fed fails to drop this bias, investors will conclude that the Fed is falling behind the inflation curve and will demand higher inflation risk premiums,” Yardeni said. “We expect the Fed to hold interest rates steady at the June meeting and shift to a more tightening policy stance.” Yardeni added that the current economic backdrop no longer provides justification for a dovish bias, let alone rate cuts. Instead, he believes that a Waller who is more hawkish than the market expects could actually be beneficial to Trump by helping to suppress long-term U.S. Treasury yields. (Source: Jin10)