US core inflation is still unacceptably high for the Fed – and that means more pain for the economy, strategist Jim Bianco says

  • US core inflation is still at an “unacceptable” level for the Federal Reserve, according to Jim Bianco. 
  • “We have not been restrictive yet on this economy,” the Wall Street analyst said. 
  • He warned that only a weakened economy that brings inflation down will stop the Fed from more hikes.

US core inflation is still too high for the Federal Reserve’s comfort – and that means more pain ahead for the economy as the central bank pushes ahead with monetary tightening to cool price pressures, according to Wall Street analyst Jim Bianco. 

According to founder of Bianco Research, core inflation – which excludes food and energy prices – is averaging 5% over the last six months this year. “That is completely unacceptable for the Fed,” Bianco said in an interview with Real Vision.

“That means all these rate hikes, we haven’t yet got to neutral yet. We have not been restrictive yet on this economy,” Bianco continued, adding that the economy has changed and inflation is a lot stickier than markets think. 

Inflation, measured by the key Consumer Price Index, has showed some signs of cooling since the Fed embarked on its aggressive plan to tame price pressures from 40-year highs reached last year. May’s reading showed inflation rose by 4.0% – a dramatic drop from 2022 but still above the Fed’s 2% target. 

“Unless you tell me that the economy gets so bad that it brings down the inflation rate, that’s not going to be enough to stop them,” Bianco said. 

The nation’s central bank has already hiked benchmark borrowing costs by 500 basis points over the past year in a bid to cool inflation. This month, the Fed announced it’s paused its tightening policy as banking tremors and cracks in the commercial real estate market from higher interest rates worry investors.