The news that "a 50 basis point interest rate cut is still an option" triggered widespread market discussion on the extent of interest rate cuts. However, these two articles did not give a definite conclusion, but only listed reasonable reasons to support interest rate cuts of 25 and 50 basis points.
Today, Bloomberg Senior Economics Editor Craig Stirling published an article titled "Globally Prepared for Fed to Cut Interest Rates," releasing an important signal. We believe that Fed Chairman Powell is inclined to support a 50 basis point interest rate cut, but New York Fed Chairman Williams did not issue clear guidance before entering the pre-meeting silent period, indicating that Powell may not be able to obtain the support of all committee members.
First of all, Bloomberg has been one of the major media outlets that speculated that the Federal Reserve may cut interest rates by 50 basis points in the past. However, this article shows that even if Powell personally supports a 50 basis point cut, this proposition may not be recognized by all members of the Federal Reserve. In the past, during Powell's tenure, dissent within the Fed was rare. Therefore, from the perspective of consensus within the Fed, a 25 basis point interest rate cut may be more realistic, while a 50 basis point cut may be difficult to reach consensus on.
Secondly, the article emphasized that the speech by New York Fed President Williams was the last public speech before the silent period before the meeting. This speech did not release a clear signal and showed that there are differences within the Fed. Williams' statement at the time was that the current environment was suitable for a rate cut, but he had not yet formed a specific stance on cutting interest rates by 25 basis points or 50 basis points.
Bloomberg published this article at a time when the market is hotly discussing a 50 basis point interest rate cut. It may be based on reliable internal information, implying that the Fed has gone through difficult discussions within the Fed. Another possibility, however, is that the source of the information came from other senior officials rather than Powell himself. Powell may spread expectations of a 50 basis point interest rate cut through the media, allowing the market to digest the news in advance, thereby creating pressure within the Federal Reserve and prompting other officials to support a larger rate cut decision.
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