Fed should start off easing cycle with 50bps cut: Claudia Sahm

Ahead of the interest rate cuts expected out of the Federal Reserve's September policy meeting, New Century Advisors chief economist Claudia Sahm and Deutsche Bank chief US economist Matthew Luzzetti join Morning Brief's Seana Smith and Madison Mills to discuss the cases for a 25 and 50-basis-point cuts further down the line from the Fed.

Sahm is also a former Federal Reserve Board economist and the namesake of the Fed's Sahm Rule, a key recession indicator.

“It's time to cut,” Sahm tells Yahoo Finance, explaining that inflation data has made “massive [improvements] with the federal funds rate still very elevated… That's your 25 basis points just on the progress with inflation.”

“What happened since the July FOMC meeting is we've gotten a lot of disconcerting information about the labor market,” she notes, adding, “You don't even need to go to the ‘we're in a recession is imminent,’ just things have cooled off considerably more and to recalibrate, respond to the data to add another 25 basis points" for a 50 point cut.

"They should be cutting rates. They're very clearly going to be doing so, and there is a compelling case to do that by 50 basis points," Luzzetti agrees with Sahm. "I think coming into the blackout period, when we heard from Fed officials, it did not seem like there was consensus around moving by the larger increment."

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This post was written by Naomi Buchanan