Renowned Investment Strategist Predicts a 25 Basis Points ‘One and Done’ Rate Cut in September by the Fed
In an interview on CNBC on August 19, Ed Yardeni, the Founder and President of Yardeni Research, shared his thoughts on the Federal Reserve’s likely monetary policy moves as the September 2024 meeting approaches. Known for his keen market analysis and prescient economic forecasts, Yardeni presented a detailed perspective on why he expects the Federal Reserve to implement a 25 basis points rate cut—a move he describes as “one and done.”
The Market’s Dovish Sentiment and Anticipated Rate Cut
Yardeni began by acknowledging the current sentiment in the markets, which he characterized as “very dovish.” This term, in the context of monetary policy, refers to the expectation that the Federal Reserve will adopt a more accommodative stance, particularly in light of recent economic data. The market, according to Yardeni, is pricing in the likelihood of a rate cut, with expectations ranging between 25 and 50 basis points. However, Yardeni firmly believes that a 25 basis points cut is the most probable outcome, aligning with the market’s dovish stance but suggesting a cautious approach by the Fed.
He explained that this anticipated rate cut is likely to be a singular action—hence his description of it as “one and done.” Yardeni argues that this modest cut will be sufficient to address current economic conditions, providing a boost without necessitating further reductions in the near term.
Economic Performance: Balancing Growth and Moderation
Yardeni provided a nuanced analysis of the broader economic landscape, highlighting both strengths and potential concerns. He noted that the U.S. economy is performing well overall, with key indicators suggesting resilience despite some areas of concern. For instance, inflation appears to be moderating, a crucial factor that supports the case for a more measured approach by the Federal Reserve. The labor market, another critical indicator, continues to show strength, further reinforcing Yardeni’s belief that the economy is not in need of aggressive monetary easing.