Ed Yardeni Says Further Rate Cuts Will Increase The Chances Of Financial Instability: Report

• Yardeni’s comments come a day after the Fed cut the policy rate by 25 basis points, on expected lines.
• Amid concerns of labor market weakness, Yardeni said lower interest rates cannot solve the problem.
• The economist also stated that U.S. corporate earnings have been “really surprisingly good” in the first three quarters of 2025.

Economist Ed Yardeni, president of Yardeni Research, has reportedly cautioned against further interest rate cuts, saying that the U.S. economy is on a relatively firm footing.

“I don’t really think the economy needs rate cuts. I think if the Fed keeps lowering interest rates, then I think they will be feeding animal spirits. In other words, I think they will increase the chances of financial instability,” Yardeni said in an interview with CNBC.

He touched upon the weakness in the labor market, stating that it might seem to need rate cuts. However, Yardeni added that what ails the labor market can be cured with lower interest rates. “Things like deportation, stricter immigration, AI, all these issues are structural in nature,” he added.

Yardeni’s comments come a day after the Fed cut the policy rate by 25 basis points, as expected. This brings down the federal funds rate to the 3.75% to 4% range.

Hawkish Cut

Yardeni termed the Fed rate cut on Wednesday a hawkish one, saying that the central bank refrained from feeding the “animal spirits” in the stock markets. This comes after Powell said that a December rate cut was not a foregone conclusion.

While the next Federal Open Market Committee (FOMC) meeting is nearly six weeks away, data from the CME FedWatch tool shows that there is a 72.6% probability of a 25 basis point cut in the December meeting.

Strong Earnings

The economist also stated that U.S. corporate earnings have been “really surprisingly good” in the first three quarters of 2025. He added that investors are looking for a Santa Claus rally, and they might very well get it.

Earlier on Thursday, Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, stated that as a result of the Fed’s cautious stance, there could be a slowdown in U.S. equities. However, he thinks it won’t be enough to stop the bull market.

Meanwhile, U.S. equities were mixed in Thursday’s midday trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.42%, the Invesco QQQ Trust ETF (QQQ) declined 0.78%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.44%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down 0.09% at the time of writing.

Also See: NVDA Stock Declines After Trump Says He Did Not Discuss Blackwell Chips With China’s Xi: Report

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Share

·

Add us on