Philadelphia Federal Reserve Bank President Patrick Harker said he expected the central bank to start with a 25 basis point (bp) rate cut in its efforts to ease monetary policy, and said it would be open to even larger cuts if the labor market deteriorates sharply. Ta.
“Starting at 25 makes a lot of sense to me,” Harker told Yahoo Finance in an interview Friday at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming. Ta.
He said he was open to the idea of further cuts if it became clear that the labor market was in trouble, but “that’s not in our forecast at the moment.”
Patrick Harker, president of the Philadelphia Federal Reserve; (Photo by John Lamparke/Getty Images) · John Lamparke via Getty Images
The regional Fed president’s new comments come just hours after Fed Chairman Jerome Powell said in a speech in Jackson Hole that “it’s time to adjust policy,” giving the market a clear sign that a rate cut is coming. gave.
Powell’s speech comes just over three weeks after the Fed’s Sept. 17-18 meeting, which is expected to announce the first interest rate cut since 2020.
But Powell was silent on whether the first rate cut would be 25 basis points or 50 basis points, or whether September would actually be the starting point, saying, “The timing and pace of the rate cut will depend on future data, developments, etc.” It depends on the outlook and balance.” About risk. ”
Read more: Fed’s 2024 predictions: What experts say about possible rate cuts
Federal Reserve Chairman Jerome Powell (left) speaks with Bank of Canada President Tiff Macklem outside the Jackson Hole Economic Symposium on Friday. (AP Photo/Amber Basler) · ASSOCIATED PRESS
However, the market brought forward expectations on Friday morning that there will be an even bigger move in September. According to CME’s FedWatch tool, the market is pricing in a 34.5% chance that the Fed will cut rates by 50 basis points by the end of its September meeting, up from about 24% the day before.
“We don’t want to start at 50 basis points,” former Cleveland Fed President Loretta Mester, who resigned from the central bank’s rate-setting committee less than two months ago, said in an interview with Yahoo Finance. . is outdated and I don’t believe the Fed is behind the curve. ”
“I think a reasonable baseline is 25,” she added.
Loretta Mester, former president of the Cleveland Federal Reserve Bank. Reuters/Lucas Jackson · Reuters/Reuters
Meanwhile, former Fed Vice Chairman Alan Blinder would have hoped the Fed would lower rates at its last meeting in July.
“I think they’re a little behind the times,” he told Yahoo Finance, but added: “It’s not dramatic.”
Harker said the Fed’s decision on whether to cut rates by 25 basis points or 50 basis points would depend on data, saying “process is more important” than actual numbers.
“The right direction is clearly downwards,” he said. “I don’t think we’re behind the times at all.”
Mester said the Fed could trigger three 25-basis point rate cuts in its final three meetings in 2024.
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