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

"A recent comment we heard from Federal Reserve Chairman Powell is, 'The economy is strong, and we don't need to rush to lower interest rates.' If that's the case, then why do anything this week?" Yardeni asked on CNBC's "Squawk Box" program on Monday morning.

The federal funds futures predict a 99% chance of the Federal Reserve cutting interest rates by another 25 basis points this week, while the likelihood of maintaining the current rate level is less than 1%.

Although the market generally expects the magnitude of future rate cuts to decrease, Yardeni stated that recent strong economic data, along with continuous GDP growth, a robust labor market, and record highs in Stocks, Gold, and Bitcoin, indicate that continuing to lower rates may not be the best decision.

He pointed out that the inflation rate remains above the Federal Reserve's target of 2%. While the Federal Reserve hinted it might pause the rate cutting cycle in January, Yardeni believes this action may come too late.

In a previous report, he also called for U.S. policymakers to maintain interest rates at the upcoming FOMC meeting and assess economic conditions. He stated, "The committee should take time to see how the economy evolves in the coming months following Trump's victory."

Federal Reserve Chairman Powell asserted at the last meeting that policymakers "cannot (or will not) model it before the new government's fiscal policy is implemented."

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

Yardeni believes that the stock market may face some selling pressure next month as investors will rebalance their portfolios or cash out after 'huge' capital gains at the beginning of the new year.

'In my view, everything indicates that interest rates are at the appropriate level,' Yardeni added. He said that if the Federal Reserve lowers interest rates now, it risks fueling a market rally, which could lead to a 'vicious adjustment.'

Editor/lambor