Report – The former NY Fed chief Dudley sees a strong case for a 50bp rate cut

Former New York Federal Reserve President Bill Dudley expressed support for a 50-basis-point interest rate cut, Reuters reported on Friday.

Speaking at the Bretton Woods Committee’s annual Future of Finance Forum in Singapore, Dudley said, “I think there’s a strong case for 50, whether they’re going to do it or not.”

Dudley pointed out that current rates are around 150 to 200 basis points above the neutral rate, where monetary policy is neither restrictive nor accommodative, the report added.

Previously, Dudley had advocated for rate cuts beginning in July.

Discussing the next moves, HSBC economists said yesterday:

“We expect the FOMC’s median projection for the federal funds target range at end-2024 to fall to 4.50-4.75% (from 5.00-5.25% previously), consistent with our forecast of 25bp rate cuts in September, November, and December.

“The latest inflation data came in a bit higher than we had anticipated, providing FOMC policymakers with another reason to start with a smaller initial rate cut of 25bp, rather than a larger 50bp move.”

On the other hand, Wells Fargo economists noted that the Fed is likely to slash borrowing costs by 25 basis points at the central bank’s meeting next week.

Over the next nine months or so, the analysts believe the FOMC will announce a cumulative 225 basis points in cuts.