Rates To Jump 50 Basis Points: ‘Red Zone’ Next Warns Economist Steve Hanke

Summary

Steve Hanke argues that accelerating money supply growth will keep US Treasury yields elevated, with another 50 basis point rise possible and the Fed likely to hike at the next meeting. He recommends avoiding long nominal bonds, sees the Iran and Strait of Hormuz conflict as an oil supply risk, and says the US housing market is in a slump due to high mortgage rates and tariffs. He also downplays the Venezuela oil deal's ability to lower crude prices and discusses dollarizing Venezuela.

• Hanke sees US 10-year and 30-year Treasury yields possibly rising another 50 basis points as money supply growth feeds inflation.
• He recommends staying away from long-duration nominal bonds.
• He expects the Fed to raise the Fed funds rate at the next meeting, with subjective probability near 80%.
• He views the Strait of Hormuz as functionally closed under Iranian control, keeping oil supply risk elevated.
• He says US housing is in a slump due to mortgage rates and Canadian lumber tariffs.
• He calls the Venezuela oil deal marginal and unlikely to lower oil prices significantly.
• He proposes dollarizing Venezuela to kill 380% inflation.