The Case for a Half-Point Fed Rate Cut

Dudley Sees Economic Data Warrants Aggressive Action to Support Growth

The Federal Reserve is widely expected to cut interest rates next week, as the global economy continues to slow and inflation remains below the Fed's target. Many economists believe the Fed will cut rates by a quarter-point, but a growing number of analysts now see a strong case for a half-point rate cut.

One of those analysts is William Dudley, the president of the New York Fed. In a speech on Tuesday, Dudley said that the recent economic data "warrant aggressive action" by the Fed to support growth. He said that he would be "open" to cutting rates by a half-point, as the global economy faces "significant downside risks." Vice Chairman Richard Clarida also expressed support for a larger-than-expected rate cut. He stated that the Fed has more flexibility to ease monetary policy than it did in the past due to lower inflation. However, Dudley emphasized that he would be looking for "convincing evidence" that a half-point rate cut is warranted. If the Fed does decide to cut rates by a half-point, it will be the first rate cut of that magnitude since the global financial crisis. The move would likely be seen as a sign that the Fed is concerned about the health of the economy. The Fed's decision will be closely watched by markets and policymakers around the world. A half-point rate cut would be a significant move, and it would be a clear indication that the Fed is worried about the global economy.