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

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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 noted that, given that the current market environment is “no longer” suitable for a dovish stance, the Fed should remove its easing bias at its June meeting. “If the Fed fails to remove this bias, investors will come to the conclusion that the Fed is lagging behind the inflation curve, and they will demand a higher inflation risk premium,” Yardeni said. “We expect the Fed to keep interest rates unchanged at the June meeting and shift toward a tighter policy stance.” Yardeni added that the current economic backdrop no longer provides a reason for a dovish bias—let alone rate cuts. Instead, he believes that a more hawkish Waller than the market expects could actually be beneficial to Trump by helping to suppress long-term Treasury yields. (Source: Jin10)
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