Will the Federal Reserve not cut interest rates in May, making this year uncertain?
The Federal Reserve is not expected to cut interest rates at the May meeting, despite the slowdown in the U.S. economy and market expectations for action from the Fed. Jim Bianco, founder of the renowned research firm Bianco Research, pointed out that persistent high inflation puts the Fed in a dilemma. U.S. core inflation has exceeded 3% for 46 consecutive months, far above the 2% target, and a rate cut could be seen as neglecting inflation, leading to a rise in bond yields
Will the Federal Reserve's decision not to cut interest rates in May leave us in a bind this year? Jim Bianco, founder of the renowned research institution Bianco Research, raised this alarming point in a recent interview.
In simple terms, the U.S. economy is currently experiencing a slowdown, and the market is hoping for the Federal Reserve to step in for rescue. However, at the same time, inflation remains a "roadblock," putting the Federal Reserve in a difficult position. Currently, market tools such as federal funds futures indicate that the Federal Reserve will not cut interest rates at the meeting on May 7.
It is important to note that U.S. core inflation has exceeded 3% for 46 consecutive months, far above the Federal Reserve's target of 2%! Therefore, if the Federal Reserve hastily cuts interest rates, the market suggests it could repeat last year's mistakes—where a rate cut would be interpreted as indifference to inflation, causing bond yields to soar and making the situation even more uncontrollable