Carnage is epic in bonds due to Fed’s inflation error: Jim Bianco
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There may be no escape from the bond market turmoil — even for stock investors.
Jim Bianco is a market analyst and warns Wall Street that crucial Federal Reserve policies to curb wild inflation are likely to cause large losses.
CNBC was told by the president of Bianco Research that “Eventually this will come back” and would affect all assets.Fast Money“, Thursday.
Bianco turned bearish on stocks late last year, primarily due to inflation risks. He blames Fed for taking too long to lift interest rates and end the pandemic of easy money.
Bianco said that last year’s call for inflation to be stable and not volatile was undoubtedly one of the worst Federal Reserve forecasts. They are stuck with their aggressive policy, because they did not raise rates slowly a year ago.
He fears about the huge catch-up cost.
“They are not planning on making a hard landing. Bianco stated that they don’t intend to create a hard landing.They want lower inflationThey will raise interest rates until they see lower inflation. What are their plans? They are going to reduce demand.”
Bianco says that the Fed can only solve its problem by quickly raising interest rates, and getting wealthy people to stop spending. Already, the bond market has discounted central bank’s bold move.
“The bond markets get it. The carnage is epicIn a tweet, he said that he was happy to share his thoughts. “This may be the most dangerous bond market of my career in terms of total return, but it might also be one the worst we will ever see.”
Bianco sees 75% inflation potential within the next 2 years and expects to have a 50-basis point increase at its next policy meeting, which will be held on May 3, 3-4, 2009.
It will reach 50 [basis points]all the way until the Fed actually raises rates and/or breaks something. Then they will be done. They won’t return to 25,” he stated. “If they want the stock market to grow, perhaps they should talk about 75 instead 50.”
Bianco claims that the Fed knows the stakes are very high.
By being too timid, they don’t wish to make the same mistake as the others. Bianco stated that this is out of the question now. They don’t want a market that is broken. They aren’t trying to cause a recession. If you continue down this path, and are so determined about trying to control inflation, then it is very possible that you’ll make a mistake.
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