TechFlow News, September 18, according to Jinshi Data, former New York Fed President Dudley wrote in a recent article that the Fed's aggressive 50 basis point rate cut makes sense. The two goals of the Fed's dual mandate (price stability and maximum employment) have become more balanced, which suggests that monetary policy should be neutral, neither suppressing nor promoting economic activity. However, short-term interest rates are still well above neutral levels. This difference needs to be corrected as soon as possible.
A 50bp cut would also be in line with the Fed's dot plot expectations. The market is expecting a total rate cut of at least 100bps by the end of 2024. If the Fed only cuts by 25bps now and expects a 50bps cut this year, it will send a hawkish signal and cause the market to wonder why it didn't cut by 50bps at the beginning. A 50bps cut in September would help the Fed get out of this dilemma.