Former Dallas Fed President Supports 50-Basis-Point Cut. Former Dallas Federal Reserve President Robert Kaplan, speaking to CNBC, said that he supports a significant 50-basis-point interest rate cut going into this week’s Federal Reserve meeting. He said such cuts would better prepare lawmakers for challenges the economy is bound to face in the near future.
As he also said on CNBC’s “Squawk Box,” if he were sitting at the table, he would be voting for 50 in this meeting. He also went on to say that the Federal Reserve is a couple of meetings behind the curve and perhaps better to let loose a rate cut in July instead of September.
In new market expectations, CME Group’s Fed Watch indicates more than 2-to-1 odds the FOMC will opt for a 50-basis-point cut instead of the previously anticipated 25-basis-point reduction. The Fed immediate standard lending rate stands between 5.25% and 5.50%.
A cut of 50 basis points, Kaplan said, would be the most prudent risk management strategy as head of the Dallas Fed from 2015 to 2021 and now as a managing director at Goldman Sachs. He also felt that if the FOMC went in for a more aggressive stance, Chair Jerome Powell should leave the door ajar in his post-meeting press conference, so the participants know that cuts thereafter will be more measured.
“It will pretty much depend on the personal view of Powell and his view to take the committee to an unanimous agreement,” said Kaplan. Two-day policy meeting of the FOMC begins Tuesday, and rate decisions are awaited in the wake of close of the meeting.
Statements by the hawkish member of the Fed revolve mainly around the monetary policy backdrop of continued debates within the central bank over the right stance as it tries to discern its way through the economic maze.
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