Famed market strategist Ed Yardeni has issued a warning that the Federal Reserve risks losing control over borrowing costs if it does not proactively pivot at its June meeting, as the bond market has already moved ahead, narrowing the window for monetary authorities. Ed Yardeni, President and Chief Investment Strategist at Yardeni Research, stated in a recent report that the Fed's current accommodative stance is "no longer appropriate" in the present market environment and should be withdrawn at the June meeting. He wrote: "If the Fed fails to remove the accommodation, investors will conclude that the central bank is behind the inflation curve and will demand a higher inflation risk premium." He expects the Fed will hold rates steady in June while shifting to a tighter policy stance. The bond market has priced this in ahead of time. Traders currently anticipate the Fed will raise rates by March of next year, with the market pricing in about a three-quarters probability of a hike before December this year. Against this backdrop, the yield on the 30-year U.S. Treasury has risen above 5%, nearing its highest level since 2007, while the benchmark 10-year yield climbed an additional 3 basis points to 4.63% during Asian trading on Monday. The accommodative stance is now "out of sync" According to reports, Ed Yardeni explicitly called for the Fed to abandon its accommodative stance at the June 16-17 Federal Open Market Committee meeting. He noted that if the central bank acts too slowly, investors will determine it is lagging behind inflation trends, subsequently demanding a higher inflation risk premium. This would ultimately push up long-term rates, causing the Fed to lose its grip on borrowing costs. Yardeni also pointed out in another report that if the 10-year Treasury yield rises further, it could peak within the 4.75% to 5% range in the coming weeks. He believes "that would be a good buying opportunity for both bonds and stocks." Ed Yardeni coined the term "bond vigilantes" to describe investors who sell government bonds in protest of fiscal policies. He is also a proponent of the "Roaring 2020s" market theme, arguing that technology and productivity gains will drive sustained economic prosperity. His year-end target for the S&P 500 is 8250 points, the highest forecast among strategists tracked. Rising rates driven by inflation concerns are not unique to the United States. Yardeni noted that synchronized yield increases in Europe and Japan, among other regions, are weakening foreign demand for U.S. Treasuries. This forces the U.S. government, amid high fiscal deficits and persistent inflation risks, to pay a higher price to compete for buyers in the global capital market. Commenting on this, a market strategist remarked: "A 5% long-bond yield is not attracting value buyers; instead, it is encouraging bond shorts and reviving the vigilante mindset." Wall Street heavyweights form a consensus Yardeni's concerns are not isolated. DoubleLine Capital CEO Jeffrey Gundlach and Pimco Chief Investment Officer Dan Ivascyn share similar views, believing the Fed may have to delay rate cuts or even pivot toward hikes. Gundlach stated in an interview: "With the two-year Treasury yield nearly 50 basis points above the federal funds rate, a rate cut seems implausible to me." These market pressures are converging on the incoming Fed Chair, who will preside over his first FOMC meeting on June 16-17. Investors expect rates to remain elevated at that time, despite ongoing calls from the President to lower borrowing costs. Yardeni proposed a counterintuitive logic: a more hawkish Fed Chair than the market expects might actually serve the administration's interests. He wrote in his report: "By adopting a hawkish stance, the Chair might have a chance to achieve what the administration truly wants—lowering borrowing costs in the real economy. Mortgage rates could decline, corporate financing conditions would improve, and the administration could tout falling long-term yields as an economic victory."