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

ChainCatcher news, according to Jinshi reports, former New York Fed President Dudley wrote in a recent article that the Fed's aggressive rate cut of 50 basis points makes sense. The two goals of the Fed's dual mandate (price stability and maximum employment) have become more balanced, indicating that monetary policy should be neutral, neither restraining nor promoting economic activity.

However, short-term interest rates are still well above neutral levels. This discrepancy needs to be corrected as soon as possible. A 50 basis point cut would also align with the Fed's dot plot expectations. The market anticipates a total rate cut of at least 100 basis points by the end of 2024. If the Fed only cuts rates by 25 basis points now and expects a 50 basis point cut later this year, it would send a hawkish signal, raising market concerns about why they didn't cut by 50 basis points from the start. A 50 basis point cut in September would help the Fed escape this dilemma.