Inflation comeback may force Fed to abandon easy money policy much sooner than intended, Wall Street forecaster Jim Bianco warns
The Federal Reserve’s intention to leave interest rates alone may get sidetracked.
According to Wall Street forecaster James Bianco, the backdrop is conducive for an inflation comeback that would force the Fed’s hand to tighten and upset the stock market.
He sees two major factors sparking inflation: A smaller economy than last year due to the coronavirus lockdowns and the impact of massive monetary and fiscal stimulus.
Bianco contends it’s a serious risk for 2021 that Wall Street should consider worrying about now.
“It hasn’t been above 2.5% in 27 years,” he said. “It’s a good place to start wondering if we’re getting inflation.”
If the Fed is buying trillions of dollars in Treasurys to keep inflation low, and the 10-year yield can go up at least 20 basis points, Bianco warns it’s a troubling signal.
“The market loves the idea of stimulus, and it’s really been pushing it because it doesn’t perceive inflation as a problem,” Bianco said.
Reference: CNBC
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