The ongoing global stock sell-off has fueled calls for the U.S. Federal Reserve to lower interest rates swiftly and decisively, with some analysts now calling for it to make an emergency cut before its September rate decision.
The futures markets, which as recently as last week expected a single quarter percentage-point cut at the U.S. central bank’s next rate decision in September, now see a half-point cut as much more likely, according to data from CME Group.
“The rate tide has quickly turned,” Bank of America economists wrote in a recent note to clients, adding they now see a September rate cut as “a virtual lock.” The U.S. central bank has held its benchmark lending rate at a two-decade high for the past year as it battles to return inflation to its long-term target of two percent.
After a small uptick earlier this year, annual headline inflation is now falling once more toward the target, while the U.S. economy is still growing and the labor market has weakened.
Against this backdrop, Fed Chair Jerome Powell signaled 커뮤니티 week that the first rate cut could come “as soon as” September.
But some analysts fear that may not be soon enough, as the markets have responded in dramatic fashion to last week’s below-target U.S. jobs report, which raised fears that the U.S. was entering a recession.
“I’m calling for a 75-basis point emergency cut in the Fed funds rate, with another 75-basis point cut indicated for next month at the September meeting,” Wharton School professor emeritus of finance Jeremy Siegel told CNBC on Monday morning. “And that’s minimum.” “I wasn’t calling for an inter-meeting cut, because that might signal panic,” the Nobel prize-winning U.S. economist Paul Krugman wrote in a social media post on Monday.
“But since we may be seeing a panic anyway, that argument loses its force,” he said, adding: “Real case for an emergency cut soon.”