If Robert Kaplan had any say in the matter, he would push for a half-percentage point rate cut at this week's Federal Reserve meeting.
The former Dallas Fed president told CNBC on Tuesday that a bolder 50 basis point move would better position policymakers for the second half of the year and the economic challenges ahead.
“If I were at the table, I would advocate for 50 at this meeting,” Kaplan said during a “Squawk Box” interview. “I think the Fed meeting might be about too late, and if I were to change it again, I might prefer that we had started cutting rates in July rather than September.”
According to CME Group's FedWatch tool, markets currently believe there is about a 2-to-1 chance that the Federal Open Market Committee will approve a 50 basis point cut, as opposed to the 25 basis point cut it had by Friday had priced in. One basis point is equal to 0.01%.
The Fed Funds rate, the central bank's key interest rate for overnight money, is currently 5.25% to 5.50%.
If the committee decides to take a more aggressive step, Kaplan said, it would then be up to Chairman Jerome Powell to indicate in his post-meeting press conference on Wednesday that further cuts “will likely be more moderate.” The Fed's two-day monetary policy meeting begins on Tuesday.
“From a risk management perspective, 50 makes the most sense,” Kaplan said. “If the group is divided, a lot of it will actually depend on what Jay Powell thinks personally, what his personal opinion is on all of this and then his ability to get everyone to make a unanimous decision.”
Kaplan led the Dallas Fed from 2015 to 2021 and is now vice chairman and member of the management committee at Goldman Sachs.
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