Lacy Hunt: Federal Reserve has engaged in stealth easing since December

Lacy Hunt has spent decades as one of Wall Street’s most committed deflationists. So when the chief economist at Hoisington Investment Management starts warning about inflation, the fixed-income world tends to pay attention.

Hunt’s argument is straightforward: the Federal Reserve has been buying roughly $290 billion in Treasury securities from mid-December 2025 through June 30, 2026. That, he contends, amounts to stealth quantitative easing, a quiet injection of liquidity into the financial system even as the Fed’s public posture has remained restrictive.

The money supply evidence

The core of Hunt’s case rests on what’s happening to other deposit liabilities, or ODL, a measure of money supply that captures the deposits sitting in the banking system. During the first half of 2026, ODL growth surged to an annualized rate of 8.9%. For context, the 10-year compounded growth rate had been running at 5.7%.

The lending data reinforces the story. Commercial and industrial loan growth hit an annualized rate of 14.0% during the same period, a dramatic leap from a prior trend of 3.3%.

Inflation itself has cooperated with Hunt’s thesis, at least directionally. A reacceleration began in February 2026, compounded by geopolitical energy shocks that pushed commodity prices higher.

A deflationist changes his mind

Hunt’s Q2 2026 Hoisington report reveals a dramatic pivot: the firm slashed its portfolio duration from approximately 21 years to under one year.

Hunt points to structural shifts that he believes have permanently altered the inflation calculus. The globalization wave from 1990 to 2020, which suppressed prices through cheap labor, efficient supply chains, and cross-border capital flows, has reversed. Reshoring, tariff walls, and geopolitical fragmentation have replaced the disinflationary tailwinds that defined the prior era.

Net national saving in the US has declined to near historical lows, another factor Hunt cites as inflationary.

What this means for markets

Hunt’s projected range for long-term inflation sits between 3.5% and 4.5%, with potential spikes above 5%. If he’s right, the implications ripple across every asset class.

For bond investors, a sustained inflation rate in that range makes long-duration Treasuries a losing proposition in real terms. A 10-year Treasury yielding 4.5% doesn’t look attractive if inflation is running at the same level.