With just hours left before the Federal Reserve announces its interest rate decision, former St. Louis Fed President James Bullard said the Fed should cut interest rates by 25 basis points today and pointed out that the case for a 50 basis point cut has been exaggerated.
In the view of the "former hawk", the Fed cannot justify a 50 basis point rate cut. He said: "If the Fed plans to cut interest rates by 50 basis points, it will quickly raise the question: why not maintain this strong pace in future meetings?"
Jon Hilsenrath, a reporter for the Wall Street Journal who was known as the "Federal Reserve News Agency" during the Bernanke era, also said in an interview on Wednesday that if the Fed cuts interest rates by 25 basis points, "it will be much easier to convey the message" because Powell can still prove that the economy is strong and they don't have to rush to cut interest rates.
If the Fed chooses to cut rates by 50 basis points, he said, Fed Chairman Jerome Powell, who will take questions from reporters shortly after the Federal Open Market Committee releases its rate decision, might have to answer questions about acting too aggressively or worrying that the economic slowdown is more intractable than thought.
Despite this, Hilson Rath believes that the Fed will cut interest rates by 50 basis points. Previously, well-known journalists such as Nick Timiraos of the "New Fed News Agency" have more or less hinted at the possibility of a 50 basis point rate cut. Dudley, former chairman of the New York Fed, has repeatedly called on the Fed to take bolder measures since last week.
The comments fueled bets on a 50 basis point rate cut, even outweighing expectations for a 25 basis point cut, with federal funds futures traders also pricing in 115 basis points of rate cuts by the Fed this year.
However, Matthew Ryan, market strategist at global financial services firm Ebury, warned that the FOMC is unlikely to endorse such expectations.
Ryan said that after the Fed releases its policy statement, Powell "is unlikely to be too disruptive in the ensuing press conference and may largely repeat his remarks at the Jackson Hole Symposium. He may make it clear to the market that there will be further rate cuts and may hint that every meeting this year will be a 'live' meeting."
Ebury expects the Fed to cut interest rates by 25 basis points later and suggests that further rate cuts will be gradual, which will provide some short-term support for the dollar. Ryan said the Fed may cut interest rates by 25 basis points three times in September, November and December.
The article is forwarded from: Jinshi Data
