Ed Yardeni expects 25 basis point Fed rate cut this week

On tariffs with countries like India and China, Yardeni said, “As long as Trump is president, we are going to have a tariff issue. It’s a tool he uses to negotiate better trade terms, and it doesn’t look like it’s going away soon.”

Regarding the US economy, Yardeni noted it remains resilient. “GDP is growing well despite a weak labor market, which shows productivity is strong,” he said. On the Fed’s upcoming decision, he added, “Everyone expects a 25 basis point rate cut. The question is whether it will be dovish or hawkish. Powell has signaled patience, but pressure remains to cut rates further.”

When asked about the terminal rate and Fed independence, Yardeni said, “A new Fed governor could reduce independence, but other FOMC members may dissent. Consensus sees 3% as neutral, but bond yields show the Fed doesn’t fully control credit conditions.”

On potential global risks, including the Bank of Japan and the yen carry trade, he explained, “Any issues in Japan are likely to stay there. Hedge funds understand the risks, so it’s unlikely to cause systemic problems. The BOJ may want to raise rates, but fiscal and political constraints make it tricky.”

Yardeni’s insights highlight the complex environment facing global markets, with trade disputes, domestic growth, and central bank policies all shaping investor decisions.