Source: Golden Ten Data

Ed Yardeni, Wall Street strategist and president of Yardeni Research, said that the Federal Reserve is widely expected to cut interest rates by 25 basis points this week, but this may be a bad idea.

“One of the things we’ve heard recently from Fed Chairman Powell is, ‘The economy is strong and we don’t need to rush to lower interest rates.’ If that’s the case, why do we have to do something this week? ?" Yardeni asked on CNBC's "Squawk Box" Monday morning.

Federal funds futures predict that there is a 99% chance that the Federal Reserve will cut interest rates by another 25 basis points this week, while the chance that interest rates will remain at current levels is less than 1%.

While the market generally expects less rate cuts thereafter, Yardeni said recent strong economic data, coupled with growing GDP and a solid labor market, as well as stocks, gold and Bitcoin all hitting all-time highs Down, indicating that continuing to cut interest rates may not be the best decision.

He noted that inflation remains above the Fed's 2% target. Although the Fed has hinted that it may pause its rate-cutting cycle in January next year, Yardeni believes that this action may come too late.

He also called in a previous report that U.S. policymakers should keep interest rates unchanged and assess economic conditions at the upcoming FOMC meeting. He said, "The committee should take time to see how the economy will evolve in the next few months after Trump wins the election."

Fed Chairman Powell asserted at the last meeting that policymakers "cannot ( or will not) model the new finance before it is implemented”.

Although the impact of tariffs and tax cuts remains uncertain, the basic view is that given that inflation is still too high, real GDP growth is strong and the labor market is close to full employment, it is likely to contradict monetary easing.

Yardeni believes stocks may face some selling pressure next month as investors rebalance portfolios at the start of the new year or cash out after "huge" capital gains.

“To me, everything points to interest rates being where they should be,” Yardeni added. He said that by cutting interest rates now, the Fed is risking market meltdown, which could lead to a "malignant adjustment."