The Fed will have to raise interest rates in July to appease 'bond vigilantes,' Yardeni says
Yardeni predicts that the Federal Reserve will need to raise interest rates in July to address concerns from bond markets. He believes that a quarter percentage point hike is likely to help manage borrowing costs and appease bond vigilantes. This move could potentially lower mortgage rates and ease corporate financing, benefiting the economy.
- ▪Yardeni suggests the Fed will raise interest rates in July to appease bond vigilantes.
- ▪Current market expectations imply only a 4.2% chance of a July rate increase.
- ▪A tightening stance from the Fed could help lower real-world borrowing costs.
Opening excerpt (first ~120 words) tap to expand
In statements prior to taking over the chair's position, Warsh has said he believes the Fed can lower its benchmark interest rate from its current targeted range of 3.5%-3.75%.However, a recent surge in inflation, triggered largely by the Iran war but also owning to other underlying factors, has led to markets repricing of rate expectations.But it's gotten more complicated with Warsh's arrival: Not only does the market not believe the Fed will cut, but odds also are rising for a hike, with current pricing implying a 42% chance of an increase by the end of the year, according to the CME Group's FedWatch tool.Yardeni, though, thinks it will come sooner than that.
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