Wall Street analysts expect a cautious approach to the first Fed rate cut

ChainCatcher reports that numerous Wall Street analysts anticipate a more conservative approach to the first interest rate cut by the Federal Reserve.

“I would hope for a 50-basis-point cut, but I suspect it will be 25,” said Mark Zandi, chief economist at Moody's Analytics. "They have done their job on full employment and bringing inflation back to target. A funds rate of 5.5% or so is too high. So, I think they need to normalize rates rapidly, and they have a lot of room to do that."

"While tightening seems to have worked, it hasn't worked perfectly as they imagined, so easing should be viewed with the same uncertainty," said Tom Simons, an economist at Jefferies. "So, if you are uncertain, you shouldn't be in a hurry."

"My guess is that they are divided," said former Dallas Fed President Robert Kaplan. "From a risk management perspective, there are some on the committee who just want to be more careful."

Seema Shah, an analyst at Principal Global Investors, said the Fed ultimately has to decide which risk is greater – reigniting inflationary pressure with a 50-basis-point cut or risking a recession with a mere 25-basis-point cut. Having been criticized for reacting too slowly to the inflation crisis, the Fed may be more passive than proactive in responding to the risk of a recession. (Golden Ten)