According to BlockBeats, on September 22, Gregory Daco, chief economist of Ernst & Young, said that the Federal Reserve was cutting interest rates in a “reactive” rather than proactive manner.
Data released two days after the July meeting showed the unemployment rate rose to 4.3%, raising concerns that the Fed waited too long to act. “Fed policymakers must adopt a strong forward-looking framework and abandon data-dependent practices. Unfortunately, they have not done so so far.”
Another challenge for Powell is that Wall Street is pricing in more future rate cuts than Fed policymakers, who this week estimated two more 25 basis point cuts by the end of 2024 and four more in 2025, Daco said.
The Fed’s rate-setting committee was almost evenly split on the number of additional rate cuts expected this year, with seven policymakers supporting another 25 basis point cut by the end of the year and nine members supporting an additional 50 basis point cut. Two policymakers did not expect any more cuts. This path means that while several officials may support a 25 basis point cut this month, they would choose a 50 basis point cut to avoid further deterioration in the job market. (Jinshi)
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