Why Ed Yardeni says the Fed’s September rate cut was unnecessary

Ed Yardeni, President of Yardeni Research, said the Federal Reserve’s recent, September 17, decision to cut rates by 25 basis points was unnecessary, pointing to strong productivity and resilient economic data. “There was no reason really for the Fed to lower interest rates,” Yardeni said, adding that he does not expect another cut this year.

He stated that the US economy remains robust, with gross domestic product (GDP) revised up from 3.3% to 3.8% in the second quarter and the Atlanta Fed now tracking 3.9% growth for the fourth quarter. According to Yardeni, “layoffs remain extremely low,” signalling a healthy labour market despite some patchy numbers.

Turning to markets, Yardeni said investors should look beyond the Magnificent Seven, pointing to the broader S&P 500. He called them the “Impressive 493,” stressing the importance of companies outside the big tech names to show how artificial intelligence (AI) can truly drive productivity.

On artificial intelligence, Yardeni drew comparisons to the late-1990s tech bubble, cautioning that the current hype may not be sustainable. While AI will be useful for some applications, he warned it is “artificial, and it’s not intelligent,” and questioned whether the large sums being invested will translate into meaningful profits.

Also Read: Fed’s policy shift supports EMs; India set to gain: Geoffrey Dennis

For the entire interview, watch the accompanying video

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