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Jason Furman, professor of the Practice of Economic Policy at Harvard, said that the Federal Reserve made a mistake keeping the federal funds rate unchanged on Wednesday.
In an X post, the former chair of the Council of Economic Advisers under the Obama administration said that, after yesterday’s news, he doesn’t see the need for an inter-meeting emergency rate cut.
“The arguments for those are discontinuous events, mostly in the financial system, not the flow of noisy macro data.”
The 10-year Treasury yield (US10Y) dropped almost 10 basis points due to the FOMC’s dovish wording.
The 10-year Treasury yield is at 3.80%, down 4.47% just today.
Furman said that, before yesterday’s FOMC communique, he leaned against a cut in the federal funds rate, “but not particularly strongly, I think that was a defensible position.”
He said that although the Fed did not change rates on Wednesday, rates did go down, but that if a rate cut would have happened yesterday, the 10-year yield (US10Y) would have stayed at current levels.
The consensus expectation is now for a September rate cut between 25-50 basis points.
