Federal Reserve Chairman Powell announced that interest rates will remain unchanged at a press conference held at the Fed’s William McChesney Martin Building in Washington, DC on June 12, 2024.
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One economist said further rate cuts by the Federal Reserve this month could alarm financial markets and send the wrong message that a recession is imminent.
Meanwhile, Federal Reserve policymakers are widely expected to begin cutting interest rates at their Sept. 17-18 meeting, with investors closely watching economic data for clues on how deep they might cut rates.
Forvis Mazars chief economist George Lagarias told CNBC on Thursday that while no one can guarantee the size of the Fed’s rate cuts at its upcoming meeting, he stands “firmly” behind the call for a 25-month rate cut. In the base camp.
“I don’t think a 50 basis point cut is urgent,” Lagarias said.
“A 50 basis point cut could send the wrong message to markets and the economy. It could send a message of urgency and, you know, it could be a self-fulfilling prophecy,” he continued.
“So if they go there without a specific reason, that’s very dangerous. Unless something happens that troubles the market, there’s no reason to panic.”
How deep will the Fed cut interest rates?
The Fed’s benchmark borrowing rate, which influences most other interest rates consumers pay, currently targets a range of 5.25%-5.5%.
Atlanta Fed President Raphael Bostic Wednesday Shows he is ready for the central bank to start lowering interest rates. His comments come ahead of Friday’s expected release of the influential non-farm payrolls report.
Strategists generally say the most likely outcome of the Fed’s upcoming meeting is a quarter-point rate cut, although recent economic data appears to have strengthened the case for a bigger move.
Data released on Wednesday showed that U.S. job openings fell to their lowest level in 3.5 years in July, which is seen as another sign of labor market weakness.
Market participants firmly expect the Fed to cut interest rates at its next policy-setting meeting, although bets on a half-percentage point cut have increased following the release of the Job Openings and Labor Turnover Survey (JOLTS) report.
Traders currently see a 59% chance of a 25 basis point rate cut in September and a 41% chance of a 50 basis point rate cut. CME Group’s FedWatch Tool.
‘We’re still far from a recession’
Investors are also likely to assess a fresh batch of economic data on Thursday ahead of the next monthly jobs report on Friday. The data includes August ADP employment data, the latest weekly jobless claims and August services data from the Institute for Supply Management.
“The economy is slowing, there’s no doubt about it, but I don’t think we’re anywhere near a recession. I know the job market is slowing, and some of it… has to do with increased supply rather than decreased demand,” Lagarias said Thursday. said on CNBC’s “Squawk Box Europe.”
“Yes, there are fewer jobs and manufacturing is soft, but we are expecting a slowdown and everyone is expecting a slowdown. There’s just no evidence of a recession, and to that point, I don’t think the Fed is Very positive action will be taken.
Lagarias is not the only one warning the Fed against cutting interest rates by half a percentage point this month.
Mohit Kumar, chief financial economist for Europe at Jefferies, told CNBC on August 13 that there is “absolutely no need” for the Federal Reserve to cut interest rates by 50 basis points at its September meeting.
—CNBC’s Jeff Cox contributed to this report.
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