Bianco said the Fed’s only solution available is to hike interest rates quickly and stop the wealthy from spending.
“The bond market gets it. The carnage is epic,” he wrote in a recent Twitter thread. “This is not only the worst bond market in our career (total return) but might be the worst of our lifetime.”
He sees a 75% chance of inflation within the next two years, and e expects a 50 basis point hike at its next policy meeting on May 3 through May 4.
“It will be 50 [basis points] all the way through until the Fed basically raises rates too much and breaks something. And, then they’ll be done. But, they’re not going to go back to 25,” he said. “If the stock market wants to go up, maybe they should be talking about 75 instead of 50.”
Bianco contends the Fed is aware the stakes are high.
“They don’t want to create the mistake in the other direction by being too timid right now. That’s out the window now,” Bianco said. “They don’t want to create a broken market. They don’t want to create a recession. But when you go down that path and you’re that adamant about trying to rein in inflation, it makes it very likely that you will create a mistake.”