Federal Reserve Bank of Atlanta President Raphael Bostic communicated his willingness to shift his interest rate outlook on forward inflation data in an interview with Yahoo Finance on Tuesday. Yardeni Research, Inc. President Ed Yardeni shares his perspective on Fed officials' mixed consensus on their monetary policy.

"I think the party line, if I can express it that way, has actually been fairly consistent in the so-called summary of economic projections that comes out quarterly following the FOMC minutes," Yardeni says. "Bostic is a bit more hawkish and maybe more balanced, saying, 'Look, it's possible that we won't be cutting at all or we will be cutting only once, but much will depend on inflation.'"

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

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RAPHAEL BOSTIC: Ultimately, it will just depend on what the data show, but I do think the risks are balanced. And given that the US economy has been so robust and so strong and so resilient, it can't take off the possibility that the rate cuts may even have to move further out.

JOSH LIPTON: That was Federal Reserve bank of Atlanta President Raphael Bostic moments ago, saying he wouldn't write off no rate cuts in 2024. For more on the Fed and tomorrow's CPI print, let's welcome in Ed Yardeni, the president of Yardeni Research. Dr. Ed, it's always good to have you on the show.

So, you heard Raphael Bostic just moments ago. It sounds like his base case is still one cut in Q4, Dr. Ed, but he didn't rule out the possibility of pushing out those cuts. What was your reaction to that? What did you make of it?

ED YARDENI: Not really surprising. He's been fairly vocal over the past couple of weeks about his view that the Fed should be in no rush to lower interest rates. And he's been sort of in the more hawkish side, basically implying that we're not going to see much more than one or two rate cuts this year.

JULIE HYMAN: Ed, we were talking in our morning meeting today about how much to weight this individual Fed speak if, at the end of the day, they all say their different opinions and then they get in the room with Jay Powell and he sort of whips them into shape and they agree. So, how much should we pay attention to all of this?

ED YARDENI: Well, I think the party line, if I can express it that way, has actually been fairly consistent in the so-called summary of economic projections that comes out quarterly following the FOMC minutes. So we had the one in December that said three cuts this year. We had the one in March that said three cuts this year.

So they've been actually, from that standpoint, fairly consistent in concluding that there will be rate cuts this year, but only three, whereas the market at the beginning of the year was discounting six to seven. I think the market now is in line with the SEP, the summary of economic projections, showing the median forecasts of the committee members at three cuts.

But I think Bostic is a bit more hawkish and maybe may actually more balanced saying, look, it's possible that we won't be cutting at all or we will be cutting only once, but much will depend on inflation. He admitted that when inflation was heating up, it was heating up faster than he expected. And he's somewhat concerned about that possibility.

JOSH LIPTON: And, Ed, what's your base case? How many cuts are you expecting this year? When do you think they will start cutting it? And does the market need cuts, Ed, to move higher?

ED YARDENI: The short answer for the last question is no. I think if we don't get rate cuts, it'll be because the economy is doing quite well, in which case the earnings story will be pretty good. I think that would actually be a better scenario for the stock market because we've seen this straight up move in the stock market basically driven by the valuation multiple.

The PE for the S&P 500 is up to 21, which is pretty rich. I'd much rather see the market moving ahead here on earnings. And I think that's exactly what it's likely to do. So, it probably means that the melt-up phase led by the PE might be behind us, and we may have a more gradual increase based on earnings, at least that's my expectation and hope.

I don't want to really see a 1999 melt-up in the market. And at the same time, I don't want to see that the market is terribly disappointed by the Fed not delivering rate cuts. But I don't think it will be.