{"id":145963,"date":"2025-09-15T22:34:09","date_gmt":"2025-09-15T22:34:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/145963\/"},"modified":"2025-09-15T22:34:09","modified_gmt":"2025-09-15T22:34:09","slug":"fed-risks-falling-behind-again-unless-it-opts-for-a-half-point-rate-cut","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/145963\/","title":{"rendered":"Fed Risks Falling Behind (Again) Unless It Opts for a Half-Point Rate Cut"},"content":{"rendered":"

The Federal Reserve stands at a pivotal crossroads this week. If policymakers deliver only a quarter-point rate reduction at next week\u2019s meeting, they risk allowing economic conditions to deteriorate before policy can catch up,\u00a0deVere Group<\/a>\u00a0cautions.<\/p>\n

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The global financial advisory giant is calling for a half-percentage-point cut while acknowledging that markets still expect a smaller move.<\/p>\n

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\u201cThe US central bank has little room for hesitation,\u201d says Nigel Green, CEO of deVere Group.<\/p>\n

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\u201cThe labor market is losing momentum, unemployment is at a four-year high, and wage growth is easing. A 25-basis-point trim would leave policy trailing the reality on the ground.\u201d<\/p>\n

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August payroll data underscored the slowdown. Nonfarm job growth came in well below forecasts and the unemployment rate jumped to 4.3%, the highest since late 2021.<\/p>\n

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Average hourly earnings also cooled. Futures tracked by the CME FedWatch tool show investors pricing roughly a 90% chance of a quarter-point cut and only a small probability of a larger move.<\/p>\n

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\u201cMarkets are conditioned for caution, but the economy demands something bolder,\u201d Nigel Green continues.<\/p>\n

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\u201cA half-point cut would reinforce consumer confidence and business investment at a time when trade frictions and rising input costs are already weighing on activity.\u201d<\/p>\n

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Trade tensions are adding complexity. President Trump\u2019s extensive tariff program is pushing up import costs from electronics to industrial metals, while energy prices have climbed through late summer.<\/p>\n

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Core inflation remains close to the Fed\u2019s 2% goal, but forward-looking indicators of hiring and output point to a broader slowdown.<\/p>\n

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\u201cInflation is no longer the overriding threat,\u201d notes the deVere chief executive.<\/p>\n

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\u201cThe greater risk is a loss of growth momentum. The Fed\u2019s dual mandate\u2014price stability and maximum employment\u2014requires decisive action when one side of the equation weakens.\u201d<\/p>\n

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Nigel Green points to the Fed\u2019s recent history as a cautionary tale.<\/p>\n

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\u201cIn 2021, the central bank misread the persistence of inflation, holding rates near zero while prices surged.<\/p>\n

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\u201cPolicymakers assured the public it was \u2018transitory,\u2019 only to scramble with aggressive hikes later. That delayed response forced steeper tightening and rattled both markets and households.<\/p>\n

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\u201cHistory teaches us that waiting for perfect data can be costly.\u201d<\/p>\n

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Global markets are already positioning for easier policy. Treasury yields have fallen to three-month lows, the dollar has softened against risk-sensitive currencies, and US equities are approaching record highs as traders bet on lower borrowing costs.<\/p>\n

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\u201cThe Fed has an opportunity to demonstrate leadership,\u201d Nigel Green adds. \u201cA half-point cut now would not be reckless. It would be a strategic step to protect growth and safeguard jobs.\u201d<\/p>\n

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deVere expects the central bank to deliver at least 75 basis points of total easing by year-end if the labor market continues to weaken, with a quarter-point this month followed by additional reductions later in the year.<\/p>\n

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\u201cInvestors and the broader economy need reassurance that the Federal Reserve is prepared to move with the pace of change.<\/p>\n

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\u201cA larger cut this week would send that signal and help secure the expansion,\u201d concludes the deVere Group CEO.<\/p>\n


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