Market bull Ed Yardeni rings the alarm on further Fed rate hikes, warning they could tank asset prices and drag the US economy into a deep recession
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- Ed Yardeni warned the Federal Reserve is being too aggressive in fighting inflation.
- The veteran economist cautioned the central bank could drive the US economy into a deep recession.
- Yardeni raised the prospect of a sharp fall in house prices and further pressure on stocks.
Ed Yardeni has sounded the alarm on the Federal Reserve's efforts to beat back inflation, warning the central bank's aggression is threatening to choke the US economy.
"I think the Fed has to be really careful here," he said on CNBC's "Squawk Box Asia" on Thursday. "If they keep going without pausing, it's really going to create a real possibility of a significant recession."
Fed Chair Jerome Powell and his colleagues, in response to inflation hitting a 40-year high of 9.1% in June, have hiked interest rates from near zero in March to a range of 3% and 3.25% today. They have made three consecutive hikes of 75 basis points in recent months, and have signaled rates could climb as high as 4.6% next year.
Yardeni, the president of Yardeni Research, argued the Fed was raising rates too rapidly in another CNBC interview on Thursday. He noted the central bank is also shrinking its balance sheet and taking a more hawkish stance on inflation than its global peers, which has boosted the US dollar and roiled foreign-exchange markets.
The veteran economist pointed to sliding food and energy prices as evidence that the inflation threat is fading. He underscored the dire consequences of the Fed continuing to tighten its monetary policy regardless.
"The housing market's getting absolutely crushed," he said, noting mortgage rates have surged from 3% to nearly 7% this year. "I think you're going to see home prices falling pretty rapidly."
Yardeni also said the sharp decline in stocks this year is "mostly attributable to the Fed," and predicted tough and uncertain market conditions until the central bank says it has inflation under control.
On the other hand, Yardeni said the downturn in asset prices has thrown up some bargains for brave investors.
"When I see corrections in bear markets, I see opportunities rather than reasons to panic," he said. "And I think there's plenty of opportunities here.