September Fed rate cut uncertain, market ‘melt-up’ risks ahead: Ed Yardeni

Ed Yardeni, President of Yardeni Research, says a September Federal Reserve rate cut is not guaranteed, despite rising market expectations after Jerome Powell’s Jackson Hole speech. Yardeni cautioned that upcoming inflation data and the August jobs report could still sway the Fed’s decision. As he explained, “I’m not convinced we’re going to get 25 basis points at this September 17 meeting.”He stated that Powell’s shift in tone, which had previously suggested no rush to cut rates, now left the door open to policy easing. Still, Yardeni emphasised that the chances of a 50 basis points cut remain uncertain, depending heavily on incoming data.

Yardeni also warned of the risk of a market ‘melt-up’ if the Fed lowers rates unnecessarily. “It would just create some real potential for a volatile melt-up situation,” he said, highlighting the dangers of speculative excess.

The next US Federal Open Market Committee (FOMC) meeting is set for September 16-17, and futures data from the CME FedWatch Tool indicates traders see nearly an 87% chance of a rate cut.

Also Read: Dollar likely to regain strength after Fed ends rate cuts: Standard CharteredOn US equities, he reaffirmed his S&P 500 targets, projecting 6,600 by year-end and 7,700 by the end of next year. He expects the rally to be driven by earnings rather than valuation, reflecting strong fundamentals.

Discussing India, Yardeni flagged the tariff dilemma with Donald Trump. If India stops buying cheaper Russian oil, it faces economic pain, but if it continues, punitive tariffs may follow. He called it a “heads you lose, tails you lose” situation, underscoring the geopolitical ambiguity weighing on Indian markets.

Also Read: Tariffs hurt, but expected rate cuts and cheap oil give Indian market a shot at outperformance

For the entire interview, watch the accompanying video

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