Ed Yardeni, president of Yardeni Research, a prominent Wall Street firm, predicts the Federal Reserve will keep interest rates where they are. He doesn’t foresee any rate cuts in 2025.
A Resilient US Economy
Yardeni points to three key reasons for his prediction:
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Strong Consumer Spending: American consumers have shown remarkable resilience over the past few years, even with rising interest rates and trade uncertainties. Their spending continues to be robust.
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Booming Tech Investment: Capital investment, particularly in the tech sector (now over 50% of total capital spending), remains surprisingly strong, defying concerns about economic uncertainty.
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High Demand for US Treasuries: Despite the US’s high national debt, the demand for US Treasuries remains strong. Yardeni argues that the US capital market is simply too large and attractive for investors to ignore, even when yields rise. He points to 2023 as an example, where yields climbed to 5% before settling back down as investors continued buying.
The Bottom Line
In short, Yardeni believes the US economy is too healthy for the Fed to consider cutting interest rates anytime soon. He expects the current interest rate policy to continue into 2025.
