Source: Jin10 Data
Goolsbee explained the dovish reasons that could trigger a rate cut, and pointed out some economic warning signs. However, another Wall Street tycoon said the Fed should not expect a rate cut before the November election.
Chicago Fed President Charles Evans outlined the reasons for a dovish interest rate cut in the coming months on Monday. Evans did not have voting powers on the Federal Open Market Committee (FOMC) this year, but he will be a voting member next year. Among all the Federal Reserve directors and regional Fed presidents, Evans is regarded as the most dovish one. In an interview with CNBC, Evans said that if there were new signs of pressure on the economy, at least the Federal Reserve should consider whether to maintain policy interest rates at their current levels. He pointed out several warning signals, including a slowdown in consumer spending, an increase in recent jobless claims, and a surge in consumer credit card debt delinquency rates. He also noted that the Fed's policy interest rates adjusted for inflation were the highest in decades, which is putting downward pressure on the economy. Evans welcomed the cooling of inflation data and suggested that it might be appropriate to start thinking about whether policies were putting too much pressure on the economy. He said that if there were more good inflation reports like the May Consumer Price Index (CPI) and slowdowns in other areas of the real economy, "then you have to start wondering whether we should continue with our restrictive measures as before." He said that the Federal Reserve raised its benchmark interest rate to its current level to prevent the risk of an overheated economy. He added that recent signs of economic weakness at least indicated that the economy was not overheated. Regarding the future prospects for inflation resistance, Evans said that the Federal Reserve’s confidence in the 2% target for inflation would be slightly strengthened and the slowing of inflation data would open the door to more accommodating policies. He also noted that the divergence between the Federal Reserve's policies and those of other central banks that have already begun to cut interest rates, such as the European Central Bank, is widening. "Given the current situation in all other developed economies, the question is, how restrictive is our policy?" he said. However, in addition to economic factors, this year's special feature of the Fed's rate trajectory is the November U.S. election. Some believe that the Fed's decisions may be influenced by politics. David Rubenstein, co-founder and joint chairman of Carlyle Group, said Monday that he did not expect the Federal Reserve to cut interest rates before the November election. In an interview with CNBC's "SquawkBox", Rubenstein said, "The Fed generally doesn't want to get involved in politics. I've always said that the Fed is unlikely to cut interest rates before the election because it would only cause too much political turmoil." He pointed out that the Fed may be aware that if it began to cut interest rates before the election, it would face severe criticism from former President Trump. "I think that when the market predicts that an interest rate cut may happen after the election, it may be right, not wrong," he added. According to the Chicago commodity trading group's "Fed Watch" tool, traders currently expect a nearly 78% chance of a rate cut in November, up from about 66% in September. The Federal Reserve's latest dot plot released earlier this month shows that the Fed expects to lower interest rates once this year, compared with the three times predicted in March. Rubenstein did not support any particular presidential candidate and indicated that he would not publicly support anyone. He said this was because of his many public service positions, such as chairman of the Kennedy Center, where he advocates for appropriations from different political factions. He added that after years as a Democrat, he has now changed his party registration to independent.
In an interview with CNBC, Evans said that if there were new signs of pressure on the economy, at least the Federal Reserve should consider whether to maintain policy interest rates at their current levels. He pointed out several warning signals, including a slowdown in consumer spending, an increase in recent jobless claims, and a surge in consumer credit card debt delinquency rates.
He pointed out several warning signals, including a cooling of consumer spending, an increase in recent jobless claims, and a surge in consumer credit card debt delinquency rates.
He also noted that the Fed's policy interest rates adjusted for inflation were the highest in decades, which is putting downward pressure on the economy.
Evans welcomed the cooling of inflation data and suggested that it might be appropriate to start thinking about whether policies were putting too much pressure on the economy. He said that if there were more good inflation reports like the May CPI and slowdowns in other areas of the real economy, "then you have to start wondering whether we should continue with our restrictive measures as before."
He added that recent signs of economic weakness at least indicated that the economy was not overheated.
Regarding the future prospects for inflation resistance, Evans said that the Federal Reserve’s confidence in the 2% target for inflation would be slightly strengthened and the slowing of inflation data would open the door to more accommodating policies.
He also noted that the divergence between the Federal Reserve's policies and those of other central banks that have already begun to cut interest rates, such as the European Central Bank, is widening. "Given the current situation in all other developed economies, the question is, how restrictive is our policy?" he said.
However, in addition to economic factors, this year's special feature of the Fed's rate trajectory is the November U.S. election. Some believe that the Fed's decisions may be influenced by politics.
Carlyle Investment Group co-founder and joint chairman David Rubenstein said Monday that he did not expect the Federal Reserve to cut interest rates before the November election.
In an interview with CNBC's "SquawkBox", Rubenstein said, "The Fed generally doesn't want to get involved in politics. I've always said that the Fed is unlikely to cut interest rates before the election because it would only cause too much political turmoil."
He pointed out that the Fed may be aware that if it began to cut interest rates before the election, it would face severe criticism from former President Trump. "I think that when the market predicts that an interest rate cut may happen after the election, it may be right, not wrong," he added.
According to the Chicago commodities trading group's "Fed Watch" tool, traders currently expect a nearly 78% chance of a rate cut in November, up from about 66% in September.
Rubenstein did not support any particular presidential candidate and indicated that he would not publicly support anyone. He said this was because of his many public service positions, such as chairman of the Kennedy Center, where he advocates for appropriations from different political factions. He added that after years as a Democrat, he has now changed his party registration to independent.
Editor/Lambor