Stocks will likely keep climbing over the next decade, because interest rates in the economy are priced just right, which means the "roaring 1990s" could make a comeback, according to Wall Street veteran Ed Yardeni.

The Yardeni Research president pointed to the stellar rally in stocks since October, with the S&P 500 close to notching yet another all-time-high this week. Meanwhile, the US economy could be poised to enter another decade of rapid growth, Yardeni said, which he previously dubbed as a return to the "roaring '20s." 

Some Wall Street commentators have warned of a coming price correction, as high interest rates still risk pushing the economy into a recession.

But today's market is flashing a parallel to the late 90s, when interest rates in the economy were in a sweet spot and the stock market boomed, Yardeni said.

"[We] are considering the possibility that the second half of the 1990s' script might be the most likely scenario for the FFR over the rest of the current decade," Yardeni said in a note on Monday, referring to the federal funds rate. "Back then, stock prices soared. The positive wealth effect boosted economic growth. Inflation was subdued by rapid productivity growth."

Though interest rates were raised into the 4%-to-5% region in the late 90s to combat inflation, that was likely in line with the neutral interest rate, a theoretical interest rate level that neither expands nor contracts the economy. The result was a strong period of growth, with productivity peaking around 4% by the end of the decade. Meanwhile, unemployment and inflation slumped, with the jobless rate declining to around 4% while consumer prices fell to 2.7% in the late 90s. 

Stocks also performed beautifully in the second half of the decade. The S&P 500 saw a monster 220% return from 1995 to the end of 1999, rising from a level of 459 to 1,469.

"That could very well describe the rest of the current decade," Yardeni said. "If so, then perhaps the FFR will indeed stay higher."

Central bankers have raised the federal funds rate to 5.25%-5.5% to tame inflation, the highest interest rates have been since 2001. 

Though rates are elevated, the real federal funds rate, which adjusts for inflation, is actually hovering around 2.24%. Real rates ranged between 2%-4% through the second half of the 90s with "no problem," Yardeni said, implying the US could pull off a soft landing.

Real rates are expected to keep a "tight lid" on inflation, Yardeni predicted, even while productivity and GDP climb higher. He expected the productivity rate to rise near 3.5% to 4.5% by the end of the 2020s, while real GDP remains around 3.1%, its historical average.

"If this is the 1990s all over again, are we in 1994 or are we closer to 1999? We aren't sure," he said. "However, we are sure that, as occurred during the second half of the 1990s, the stock market is having a significantly positive wealth effect on the economy now that the major stock market indexes are at record highs. That's another reason to believe that the economy will remain resilient and another reason why the Fed might hesitate to lower the FFR for a while — maybe a long while."

Investors are still ambitiously pricing in rate cuts for 2024, though Fed officials have warned rates could stay higher for longer as they continue to monitor inflation. Markets are betting pricing in a 43% chance the Fed could cut interest rates 100 basis points or more by the end of the year, according to the CME FedWatch tool, more than the 75 basis points that the Fed has officially projected for the year.