As the announcement of the Federal Reserve's interest rate decision is only a few hours away, former St. Louis Fed President Brad stated that the Fed should cut rates by 25 basis points today, and pointed out that the reasons for a 50 basis point cut have been exaggerated.

In the view of this "former hawk", the Fed cannot justify a 50 basis point rate cut. He said, "If the Fed plans to cut rates by 50 basis points, it will soon raise the question: why not maintain this strong pace in future meetings?"

Jon Hilsenrath, the Wall Street Journal reporter known as the "Fed Whisperer" during the Bernanke era, also stated in an interview on Wednesday that if the Fed cuts rates by 25 basis points, "the message would be much easier to convey", as Powell can still prove that the economy is strong and they do not have to rush to cut rates.

He said that if the Fed chooses to cut rates by 50 basis points, Fed Chairman Powell may have to answer questions about being too aggressive or concerns that the economy is slowing more than imagined. Powell will answer questions from reporters shortly after the Federal Open Market Committee (FOMC) announces its rate decision.

However, Hilsenrath believes that the Fed will cut rates by 50 basis points. Earlier, well-known reporters such as Nick Timiraos of the "New Fed Whisperer" also hinted to some extent at the possibility of a 50 basis point cut. Former New York Fed President Dudley has repeatedly called on the Fed to take bolder measures since last week.

These comments have fueled speculation in the market about a 50 basis point rate cut, even overshadowing expectations for a 25 basis point cut. Federal funds futures traders also expect the Fed's rate cuts this year to reach 115 basis points.

However, Matthew Ryan, a market strategist at global financial services firm Ebury, warned that it is unlikely that the FOMC will endorse this expectation.

Ryan said that after the Fed released its policy statement, Powell is unlikely to disrupt the subsequent press conference too much and may largely repeat his remarks at the Jackson Hole symposium. He may explicitly indicate to the market that there will be further interest rate cuts and may suggest that each meeting this year is 'live'.

Ebury expects the Fed to cut interest rates by 25 basis points later and suggest that further rate cuts will be gradual, providing some short-term support for the US dollar. Ryan stated that the Fed may cut interest rates by 25 basis points three times in September, November, and December.

Editor/Lambor