ChainCatcher reported that according to Jinshi, former New York Fed President Dudley wrote in a recent article that the Fed's aggressive 50 basis point rate cut makes sense. The two goals of the Fed's dual mandate (price stability and maximum employment) have become more balanced, indicating that monetary policy should be neutral, neither suppressing nor promoting economic activity.
However, short-term rates are still well above neutral. This divergence needs to be corrected soon. A 50bp cut would also be consistent with the Fed's dot plot expectations. The market is expecting a total rate cut of at least 100bp by the end of 2024. If the Fed only cuts by 25bp now and expects a 50bp cut this year, it will send a hawkish signal and cause the market to wonder why it didn't cut by 50bp at the beginning. A 50bp cut in September will help the Fed get out of this dilemma.
