Former New York Fed President Dudley: The Fed will cut interest rates by 50 basis points

According to Jinshi Data on September 18, former New York Fed President Dudley wrote in his 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, suggesting 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 50 basis point rate cut would also be consistent with the Fed's dot plot expectations. The market expects a total rate cut of at least 100 basis points by the end of 2024. If the Fed only cuts by 25 basis points now and expects a 50 basis point rate cut this year, it will send a hawkish signal and cause the market to wonder why it didn't cut by 50 basis points at the beginning. A 50 basis point rate cut in September will help the Fed get out of this dilemma.