Investors anticipating substantial rate cuts from the Federal Reserve this year might be in for a surprise. Ed Yardeni, president of Yardeni Research and a seasoned Wall Street expert, forecasts just one modest rate cut in 2024, contrary to market expectations of 100-125 basis points of cuts by year-end.
Yardeni argues that the U.S. economy remains robust, making aggressive rate cuts unnecessary. Despite a weak jobs report in July, which spurred recession fears and led to a stock sell-off, Yardeni believes the economy is on solid ground. He predicts stronger job data in the coming months, attributing the July dip to temporary factors like severe weather.
Inflation is also trending down, with consumer prices cooling to 2.9% last month, edging closer to the Fed’s 2% target. Moreover, GDP growth has rebounded, with the economy expanding by 2.8% in the last quarter.
While the New York Fed estimates a 56% chance of a recession by mid-2025, Yardeni’s outlook suggests that the full impact of higher interest rates may not necessitate the steep cuts some are expecting. Instead, he anticipates a single quarter-point cut, which he sees as sufficient given the current economic conditions.