As the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) gears up for its meeting on Sept. 18, anticipation is building for a rate cut. Market participants are placing their bets, with expectations leaning toward either a 25 basis points (bps) reduction or a 50bps cut. However, Massachusetts Senator Elizabeth Warren is urging the Fed to go further, advocating for a more substantial 75bps cut next month.
The Fed Under Fire: Elizabeth Warren Pushes for Unprecedented Rate Cut
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Elizabeth Warren’s Bold Demand
On Aug. 26, Democratic Massachusetts Senator Elizabeth Warren took to X to demand that the U.S. central bank cut the interest rate by 75bps. “It’s time for a big cut in interest rates by the Fed — at least 75 basis points,” Warren argued. “Chair Powell already admitted he’s waited too long. Delay puts too many jobs at risk and threatens our entire economy,” she added.
Presently, the chances of the Fed cutting the rate by 75 basis points seems extremely low and the market is betting on either a 25 to 50bps cut. CME’s Fedwatch tool gives a 25bps cut a 69.5% chance and the odds of a reduction two times that size is 30.5%. Polymarket bettors are not factoring in a 75bps cut at all either. Warren also shared her view on the Fed and Chair Jerome Powell in an interview with Punchbowl News.
She told the publication Powell has been “singing from only one page out of the hymnal” and further stated :
[Powell] has been wrong on interest rates, and he needs to step up now with a larger rate cut.
On X, Warren faced an entirely different crowd. “Says the career academic and political hack who knows zero about the economy,” one person replied to the U.S. Senator. “Here’s an idea- how about you advocate real cuts in big government spending?” Another accused Warren of using the tactic to get Kamala Harris elected.
“Whatever it takes to get Kamala elected. Interest rate cuts this close to election are only done to pump the stock market, misleading the public the economy is strong,” the individual wrote. “The Fed is just another government agency with biased leadership.”
Warren’s comments follow a comprehensive academic paper that questions the widely accepted notion of the Federal Reserve’s political independence. The paper, authored by Thomas Joseph Webster, Professor Emeritus of Economics at Pace University, presents evidence suggesting that the Federal Reserve functions more as a political instrument than as an autonomous entity.
What do you think about Warren’s demands? Share your thoughts and opinions about this subject in the comments section below.
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