Macro strategist Jim Bianco thinks the US is in an “elevated inflation era.”
In a new interview with Bloomberg, Bianco, the president of Bianco Research, pointed to US Treasury Secretary Scott Bessent, who said in an interview this week that he wouldn’t issue long-term bonds with the Federal Reserve’s current interest rates.
“Why would we do it at these rates? We are more than one standard deviation above the long-term rate, so why would we do that? The time to have done that would’ve been in 2021, 2022.”
Bianco says Bessent’s comment implies that there’s something wrong with the bond market, but the macro strategist argues that the reality is the rates are just reflective of the new economic environment.
“I’m an inflationista at heart, I think that the cycle of inflation ended in 2020, and we’re in an elevated inflation era. Now that I’ve said that, I always like to quip, ‘I don’t mean 8-10% or Zimbabwe inflation, but I mean like 3-4% inflation.’ And I’m talking about core, and we’re at about 2.8% right now. I think that’s the biggest risk, is that we settle in at a 3ish percent or low 3% on the inflation rate, and then the realization is normal interest rates are around 5% and that is the world we live in.”
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