Investing.com -- Yardeni Research believes the Federal Reserve should raise interest rates in July, well ahead of a consensus that does not expect a hike until late 2026 at the earliest, arguing that broad-based inflation and a resilient economy have shifted the balance of risks decisively toward tightening.

The research firm said it expects the Fed to pivot to a tightening bias at its June 16-17 meeting, followed by a 25-basis-point rate hike the following month.

"The pressure is on the Fed to do so to maintain its credibility," Yardeni Research wrote, warning that if the Fed fails to act, bond markets will force the issue by pushing yields higher.

The inflation case is said to rest on April data showing that the headline CPI, PPI, and the personal consumption expenditures deflator were all at levels last seen in 2023.

Core readings are also elevated, and the Cleveland Fed's nowcasting tool projects headline CPI rising to 4.18% year-over-year in May. Yardeni noted that even a Hormuz reopening would not quickly resolve price pressures, as supply-chain backlogs and energy pass-throughs typically take months to unwind.

On the growth side, the Atlanta Fed's GDPNow model projects second-quarter GDP growth of 3.8%, while unemployment claims remain subdued and retail sales are running well above recent averages, reducing the urgency to protect the labor market through easier policy.

Recent Fed commentary reinforces the shift, with officials including Governor Christopher Waller and St. Louis Fed President Alberto Musalem both striking hawkish tones.

Yardeni concluded that "rate cuts are off the table; rate hikes are on it."