Former Fed economist Sam: The Fed should cut interest rates by 50 basis points

Odaily Odaily News: "We have had two more months of good inflation data since the last Fed meeting, and that's what the Fed asked for," said Claudia Sahm, former Fed economist and chief economist at New Century Advisors, in an interview last Friday. However, the question now is how big a move the Fed should make. Financial markets, a compass for the direction of central banks, have not been helpful in this regard. According to CME's FedWatch tool, the futures market focused on a 25 basis point rate cut for most of last week, but on Friday, traders turned to almost equal odds of a 25 or 50 basis point cut. Sahm is one of those who think the Fed should take bigger action. "The inflation data alone is enough for us to cut 25 basis points next week, and there will be a series of rate cuts after that," she said. She believes that the federal funds rate is already above 5% and has been for more than a year to fight inflation. "The battle is already won, and they need to start cutting rates," she said. That means a 50 basis point cut from the beginning to prevent a potential labor market recession. She said: "The labor market has been weak since July last year, so part of this is a recalibration. We are getting more information. Fed officials need to make this 50 basis point cut and be ready to go further." (Jin Shi)