Fed Rate Cuts This Week? Ed Yardeni Reportedly Says 50 Bps Cut Could Result In The Market And Valuations 'Going Up Too Quickly'

The Federal Reserve’s rate cut expected on Wednesday remains in focus as economist Ed Yardeni, founder of Yardeni Research, on Monday reportedly said that while equity markets are “hoping” for a 25-basis-point (bps) cut, Wall Street would be “pleasantly surprised” by a 50 bps cut.

“But 50 bps would really create a multiple situation (sic) in the market where I think you would see the markets going up too quickly, and valuation,” Yardeni said in an interview with CNBC.

Yardeni added that valuations are not cheap right now. “We’ve got a 22 times forward PE (price-to-earnings ratio). This has really been an earnings-led bull market. The last recession was during the pandemic, and it only lasted two months. It took us a few months to recover. Since that point where we recovered what we lost, we’re up 100% on the S&P 500, and forward earnings are up 100%.”

The economist also observed that earnings have been “surprisingly robust” despite the Trump administration’s Department of Government Efficiency (DOGE) efforts and the tariff policies.

Data from CME Group’s Fedwatch tool indicates a 96.4% probability that the Fed will cut interest rates by 25 basis points on Wednesday.

Meanwhile, U.S. equities gained in Monday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.45%, while the Invesco QQQ Trust (QQQ) rose 0.64%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.18% at the time of writing.

Also See: Dow Futures Rise Ahead Of Fed Decision On Interest Rates This Week: TSLA, NVDA, CTVA, UNH Among Stocks To Watch

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