Nasdaq CEO advises caution on starting rate cuts too early, expressing a 'little concern'.

• Adena Friedman, CEO of Nasdaq, stated that the Fed aims to achieve stability around the interest rate before making substantial changes.
• For the third consecutive month, the Federal Reserve maintained interest rates at their current level in December.

Adena Friedman, CEO of Nasdaq, advises caution against the Federal Reserve cutting interest rates prematurely.

At a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland, Friedman stated on Tuesday that although there are indications that rate cuts may be necessary as the year progresses, the issue is when to begin. He added that if he were the Fed, he would be cautious about starting too early.

While inflation is moving in the correct direction, the Fed anticipates it to moderate, which could make it more challenging to lower interest rates.

Friedman stated that the U.S. central bank aims to achieve stability around the interest rate before making significant moves.

In December, the Fed maintained the benchmark overnight borrowing rate in a targeted range of 5.25%-5.5% for the third consecutive time. The Federal Open Market Committee members indicated that they may consider three rate cuts in 2024.

The FOMC implemented 11 rate hikes from March 2022 to July 2023 to address rising inflation.

‘More confidence in the market’

To predict when interest rates might decrease and when the cost of capital may fall, investors should focus on improving their ability to forecast company earnings in the future, she advised.

According to Friedman, the decrease in inflation and the moderation of business costs would increase companies' confidence.

"Therefore, the increased confidence in the market is reflected in the market values," she stated.

While market performance was "top heavy" last year, a broader-based improvement in valuations was emerging, including in lesser-valued companies, according to Friedman.

She stated that if investors are interested in putting risk capital to work, it could lead to the reopening of the IPO market, as there are approximately 85 companies that have filed to go public on the Nasdaq.