David Tepper believes the Fed must reduce interest rates by at least two or three additional times to maintain its reputation.

David Tepper of Appaloosa Management advised investors to trust the Federal Reserve's promise to lower interest rates, as the central bank must maintain its credibility.

"Tepper stated on CNBC's "Squawk Box" Thursday that he had read what Powell had said, which was a recalibration. Powell had to follow through somewhat, but Tepper acknowledged that he was not very smart and simply read what they said. He questioned whether they had conviction, as they usually did what they said when they had a high level of conviction."

The Fed last week reduced benchmark rates by half a percentage point, initiating its first easing campaign in four years with an aggressive move, despite a stable economy. Additionally, the central bank indicated through its "dot plot" that it expects to cut rates by an additional 50 basis points by the end of the year.

Jerome Powell, the Fed Chairman, stated that the cut was a "recalibration" for the central bank and did not guarantee similar actions at every future meeting.

Tepper stated that the Federal Reserve must cut interest rates by 25 basis points at least twice, or they will lose credibility. He added that they may need to make another 25, 25, or 25 basis point cuts to achieve their goal. (1 basis point equals 0.01%)

'I don't love the U.S. markets'

Despite the super-sized rate cut last week, Tepper said the macro setup for U.S. stocks makes him nervous as the Fed eases monetary policy in a relatively solid economy like it did in the 1990s.

"In the 90s, the Fed cut rates into Y2K, resulting in a good economy. However, I am not a fan of the market conditions in 1997, which were rich, and the bubble mania in 1999-early 2000. As a value investor, I prefer to invest in undervalued assets."

The Atlanta Fed predicts 3% growth in GDP in the third quarter due to the resilience in consumer spending. Despite this, most indicators suggest that inflation is still above the Fed's 2% target. However, the slowdown in the labor market has contributed to the oversized interest rate cut.

'Sure as heck won't be short'

The widely followed hedge fund manager stated that although the central bank's move caused him some hesitation, he is not betting against U.S. equities due to the immediate benefits of easy policy.

"Tepper stated that he does not love the U.S. markets from a value perspective, but he will not be short because he is nervous about the setup with easy money everywhere and a relatively good economy. He added that being long the U.S. would make him nervous."

Tepper, who owns the National Football League's Carolina Panthers team, has announced that he is fully committing to China due to a recent rate cut and a series of government support measures aimed at bolstering the country's struggling economy.

He added that he prefers Asian equities and European equities to U.S. stocks.