• The Fed is poised to raise interest rates just one more time in November before stopping, according to Ed Yardeni.

• That's because there is a growing risk that financial markets are on the verge of instability due to a soaring US dollar.

• "The soaring dollar has been associated in the past with creating financial crisis on a global basis," Yardeni told Bloomberg.

The Federal Reserve will raise interest rates just one more time in November before it stops due to a soaring US dollar, according to market veteran Ed Yardeni.

That point of view runs counter to market consensus, which currently expects a 75 basis point rate hike in November, followed by a 50 basis point rate hike in December. Some even expect the Fed to raise rates by another 25 basis points in early 2023 before it ultimately pauses, with the Fed fund rate sitting around 4.50%. The Fed funds rate is currently between 3.00% and 3.25%.

But Yardeni warned that an overly aggressive Fed tightening policy, combined with a surging US dollar, risks breaking financial markets. The US Dollar Index has surged more than 15% year-to-date amid a tightening Federal Reserve and instability in other currencies like the British pound.

"I think it's already breaking. What's breaking is the soaring dollar. A soaring dollar has been associated in the past with creating financial crises on a global basis. We have to have a global perspective on all of this, and this tight monetary policy here is having a tremendous impact on the rest of the world, especially in emerging markets," Yardeni told BloombergTV on Monday.

The tight monetary policy from the Fed has already included three outsized 75 basis point rate hikes, a 50 basis point rate hike, and a 25 basis point rate hike all in a bid to tame inflation. The Fed has also initiated a reduction of its near $9 trillion balance sheet, as it rolls off $95 billion per month in a combination of Treasury and mortgage bonds.

"I'm totally stumped, mystified, surprised that Fed officials do not seem to acknowledge that just focusing on the Fed funds rate as a part of the monetary tightening cycle, is a mistake when you also have QT2 and a soaring dollar. These are very restrictive monetary developments," Yardeni said.