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While many analysts anticipate multiple rate cuts<\/a> this year, famed economist Ed Yardeni has a different outlook.<\/p>\n Yardeni, president of Yardeni Research, believes Jerome Powell and the Federal Open Market Committee will implement just one modest rate cut.<\/p>\n Expectations<\/a> for a September cut were bolstered by a weak jobs<\/a> report early in the month, with another reduction anticipated in December.<\/p>\n However, Yardeni downplays the jobs report\u2014which initially spooked markets with recession fears\u2014and cites consumer resilience as a reason to expect only a single rate cut this year.<\/p>\n \u201cThe markers are very dovish,\u201d Yardeni told CNBC<\/a> Monday. \u201cExpectations are 25 to 50 basis points in the September meeting, I think there\u2019s still expectations that maybe we\u2019ll even have 100 basis points between now and year end. <\/p>\n \u201cI think it\u2019s going to be 25 basis points at the September meeting and I think it\u2019s going to be one and done. The economy is just doing too well. <\/p>\n \u201cI know that people got freaked out by the last employment report but I think a lot of that was weather, and some of the other indicators that came out kind of confirmed that.\u201d<\/p>\n The Labor Department\u2019s July job report showed a drop from the 179,000 jobs created in June. Forecasters had expected to see 175,000 jobs in July and instead saw a mere 114,000. The unemployment rate rose to 4.3% from 4.1%, prompting calls for an emergency rate cut to ensure the latter half of the Fed\u2019s dual mandate.<\/p>\n But since then proponents for a significant cut<\/a> have walked back their take, including the likes of Wharton professor Jeremy Siegel. <\/p>\n In his weekly commentary for investment specialists Wisdom Tree<\/a> this week, the professor emeritus at the University of Pennsylvania admitted: \u201cCertainly, the data has come in stronger than I (and many others) have anticipated. Particularly surprising was the drop in jobless claims, now nearer to the midpoint of my 200k to 240k range after breaching the upper limit.\u201d<\/p>\n Professor Siegel maintains, however, that it is time for the base rate to come down, saying that, according to a raft of forward-looking policy rules, it should be below 4%.<\/p>\n That would represent a significant drop off from where rates currently sit: At a more than two-decade high between 5.25 and 5.5%. <\/p>\n Yardeni is unconvinced the data is cool enough to push Chair Powell and his colleagues to such lengths, adding: \u201cIf I\u2019m correct \u2026 they\u2019re going to get some indicators before the September FOMC meeting that suggests the economy\u2019s alive and well, the labor market\u2019s doing well and that inflation\u2019s continuing to moderate.<\/p>\n \u201cSo I think 25 basis points is enough and I think that\u2019s probably what Chair Powell will communicate. It\u2019ll be dovish but not as dovish as the market is discounting.\u201d <\/p>\n Ever the optimists, analysts around the globe are still pricing in multiple cuts this year. <\/p>\n In a note seen by Fortune<\/em> published earlier this month, Bank of America\u2019s Claudio Irigoyen\u00a0and Antonio Gabriel\u00a0write: \u201cSolid activity and mostly good news on inflation leaves us comfortable with our call for two 25bp\u00a0cuts in 2024, in September and December. July retail sales came in stronger than expected.\u00a0<\/p>\n They are not alone in their take. <\/p>\n In its monthly update published yesterday Vanguard<\/a>, an investment firm with $9.3 trillion in assets under management, wrote: \u201cRecent data suggest that the labor market is softening, and the Federal Reserve appears to be taking notice. The Fed gave a strong signal in July that it was prepared to\u00a0cut\u00a0the federal funds rate target by 25 basis points in September. <\/p>\n \u201cWe are anticipating an additional second 25-basis-point\u00a0cut\u00a0this year and a target range of 3.25%\u20133.5% at the end of 2025.\u201d<\/p>\n Goldman Sachs<\/a> is even more dovish. <\/p>\n A Q&A with chief U.S. economist David Mericle shared yesterday revealed: \u201cWe expect an initial string of three consecutive 25bp cuts in September, November, and December, followed by quarterly rate cuts starting next year to a terminal rate of 3.25-3.5%.\u00a0<\/p>\n \u201cWe think the increase in the unemployment rate to date and other softer signs in the labor market are enough for the FOMC to accelerate the initial pace \u2026 but not enough to cut by 50bp. <\/p>\n \u201cWe see comments from Fed officials since the July employment report as consistent with our forecast of a 25bp cut in September. A weaker August employment report than we expect would be the most likely catalyst for a larger cut in September.\u201d<\/p>\n<\/div>\n\nSiegel: \u201cData has come in stronger than I anticipated\u201d<\/h2>\n
Cut expectations<\/h2>\n
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