If Robert Kaplan still had a say in the matter, he would push for a half-percentage point rate cut at this week’s Fed meeting.
The former Dallas Fed president told CNBC on Tuesday that a bold move of 50 basis points would put policymakers in a better position heading into the second half of the year and dealing with future economic challenges.
“If I were sitting at the table, I would advocate for 50 people at this meeting,” Kaplan said in an interview with “Squawk Box.” “I think the Fed meeting would probably be a little later, if I were to do it over, I would probably prefer that we start cutting rates in July rather than September.”
Markets now see a roughly 2-to-1 chance of the Federal Open Market Committee approving a 50-basis-point rate cut, rather than the 25-basis-point cut expected before Friday, according to CME Group’s FedWatch tool. 1 basis point equals 0.01%.
Federal funds, the central bank’s benchmark overnight lending rate, currently ranges from 5.25% to 5.50%.
Kaplan said that if the committee decides to take more aggressive steps, Chairman Powell will say at a post-meeting news conference on Wednesday that further cuts in the future “will likely be more cautious.” The Federal Reserve’s two-day policy meeting begins on Tuesday.
“From a risk management perspective, 50 makes the most sense,” Kaplan said. “If there’s a split in the team, really, a lot will depend on what Jay Powell thinks personally, what his personal preference is on all this, and his ability to convince everyone to come to a unanimous decision.”
Kaplan served as chairman of the Federal Reserve Bank of Dallas from 2015-21 and is currently vice chairman and member of the management committee of Goldman Sachs.
