Strategist: The Federal Reserve should abandon its dovish stance and adopt a hawkish position at the June meeting

According to Golden Ten Data on May 18, Ed Yardeni, President and Chief Investment Strategist of Yardeni Research, stated that as investors grow increasingly concerned about inflation, the Federal Reserve needs to keep pace with the bond market; otherwise, it may risk losing control over borrowing costs. He pointed out that given the current market environment is “no longer” suitable for a dovish stance, the Federal Reserve should remove its dovish bias at the June meeting. “If the Federal Reserve fails to remove this bias, investors will conclude that the Fed is falling behind the inflation curve and will demand a higher inflation risk premium,” said Yardeni. “We expect the Fed to keep interest rates unchanged at the June meeting and shift to a hawkish policy stance.” Yardeni added that the current economic backdrop no longer provides reasons for a dovish bias, much less for rate cuts. On the contrary, he believes that a more hawkish Waller than the market expects could actually benefit Trump by helping to suppress long-term Treasury yields.