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- The Fed may not cut rates at all this year because high rates "aren't hurting much," according to analyst Jim Bianco.
- The opposite of what the Fed needs to administer a cut is playing out, he said.
- "On the rates side, we really haven't broken enough yet to do the damage that everybody thinks."
One prominent Wall Street analyst says the US might sail through 2024 with no rate cuts from the Fed at all.
"I was in the zero-to-two cut camp at the beginning of the year, and I'm more closer to the zero camp — no rate cuts — for right now," Bianco said in a Bloomberg interview on Monday.
He says that's because, as high as interest rates are, they're not doing that much damage.
"The old adage on Wall Street is that rates go up until something breaks, and I would argue at least on the rates side, we really haven't broken enough yet to do the damage that everybody thinks," he said.
Bianco noted that while there have been a few cracks like in commercial real estate, the economy mostly seems to be doing alright. Further, he said it was able to get through 10-year Treasury yields exceeding 5% in October, and it's stayed relatively strong with the Fed funds rate in the 5.25%-to-5.5% range.
"Rates have a ways to go up before it get to that 'it's hurting' spot," Bianco said.
The high rates haven't dragged earnings lower either, with 78% of companies beating expectations by a median of 7%, Fundstrat data shows.
Recent economic data also supports the idea that elevated rates haven't hurt. In recent weeks the US has seen strong GDP growth, jobs numbers, and consumer spending. Inflation has also been hotter than expected, which has challenged the urgency of Fed rate cuts.
For the Fed to lower rates, Bianco said officials are looking for an economy that is "unmistakably weak" and an inflation rate of 2%. Neither seem to be playing out right now (if anything, it's the opposite), bolstering the case for "higher for longer" interest rates for 2024, he concluded.
For now, Bianco sees a less than 50% chance of rate hikes happening this year.