Investment guru Ed Yardeni warns that the Federal Reserve must stop hiking interest rates right now in order to stabilized bruised and battered financial markets.
The Newsmax Finance Insider told CNBC that the U.S. central bank can reverse the recent market decline by abandoning its strategy of continuous rate hikes.
"We need the Fed to pause here and just take a breather," the Yardeni Research President said Friday on CNBC. "Let's see how the economy plays out, and that will help the stock market a lot."
After the Fed raised its key policy rate at last month's meeting for the third time this year, the action was immediately assailed by President Donald Trump as a risk to the economy's continued strength under his watch, the Associated Press reported.
In recent weeks, Trump has escalated his attacks, sparking alarm among Fed watchers and economists. The Fed has long been seen as needing to remain free of political pressure to properly manage rates, and presidents have generally respected that independence, especially publicly.
Trump, though, has stepped up his attacks of late, and in a recent interview he went so far as to call the Fed, with its steady rate hikes, "my biggest threat."
Meanwhile, Yardeni said he sees strong economic fundamentals supporting earnings growth through next year.
"I think it's going to be the best retail season we've ever had. Consumers are really in very good shape," Yardeni told CNBC. "That should help to turn the market around."
However, some Fed officials apparently want to keep raising rates.
New Federal Reserve vice chair Richard Clarida last week said he'd support "some further" increase in interest rates as the best way to nurse the current U.S. recovery along while guarding against any jump in inflation.
In his debut speech as the Fed's second in command and the most recent appointee by President Donald Trump, Clarida said the economy showed signs of continuing to motor along, making it appropriate to continue to gradually raise interest rates that remain "accommodative," or encouraging of spending and investment, Reuters explained.
Trump has recently criticized the Fed as countering his economic plans with rates that are being raised too fast. Clarida, in his first meeting as vice chair in September, voted in favor of a quarter point rate increase, and now says more are warranted.
"U.S. monetary policy remains accommodative," Clarida said in remarks at the Peterson Institute for International Economics. "If the data come in as I expect, I believe that some further gradual adjustment in the federal funds rate will be appropriate."
"With the economy now operating at or close to mandate-consistent levels for inflation and unemployment, the risks that monetary policy must balance are now more symmetric and less skewed to the downside."
The Fed in recent years has kept rates low in part to guard against a drop in inflation that could prove damaging to future economic growth.
Fed officials last month debated how high they should raise interest rates to achieve their economic goals, with some arguing that they might need to lift rates to a level that would modestly restrain growth.
In the end, the Fed modestly raised its key short-term rate and predicted that it would continue to gradually tighten credit to manage growth and inflation amid a steadily healthy job market and economy.
The discussion, revealed last Wednesday in minutes of the Fed's Sept. 25-26 policy meeting, showed that a few participants thought the Fed's key rate would need to "become modestly restrictive for a time" to prevent inflation from climbing too high. Other officials said they would oppose a restrictive rate policy without clear signs of an overheating economy and rising inflation.
The minutes did not indicate that officials reached a conclusion. But they did show that all Fed officials favored gradual rate increases.
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