Nobel laureate Joseph Stiglitz wants Fed to cut interest rates significantly | Real Time Headlines

Nobel laureate Joseph Stiglitz said the Federal Reserve should cut interest rates by half a percentage point at its upcoming meeting, accusing the Fed of going “too far, too fast” in tightening monetary policy, causing further inflation problems. deterioration.

His comments came just before Friday Key release of US jobs datainvestors are paying close attention to August non-farm payrolls data, looking for clues about the scale of employment. expected Rate cut this month. Employment data is expected to be released at 8:30 a.m. ET.

strategist The most likely outcome of the Fed’s Sept. 17-18 meeting is generally said to be a 25 basis point rate cut, although bets on a 50 basis point cut have increased in recent days.

One basis point is 0.01 percentage point.

Stiglitz, who won the Nobel Prize in 2001 for his market analysis, joined Chief U.S. Economist, JPMorgan Chase Calls for a sharp rate cut this month.

“I was criticize “The Fed went too far, too fast,” Stiglitz told CNBC’s Steve Sedgwick at the annual Ambrosetti Forum in Cernobbio, Italy, on Friday. “

Stiglitz said it was “very important” for the Fed to normalize interest rates, adding that it was a mistake for the Fed to keep its benchmark borrowing rate near zero for such an extended period of time since 2008.

“But then they exceeded the level of interest rates, which I think put the economy at risk for little benefit and, ironically, may actually increase inflation, because if you look more closely at the sources of inflation, you see A big question.

“If you think about how we deal with the housing shortage, which is driving up inflation — do you think raising interest rates, making it more difficult for real estate developers to build more homes and homeowners to buy more homes, will solve that problem? Is there a housing shortage problem?

“So, I believe they contributed to the inflation problem. Now, even though that’s not how their model works, and they don’t delve into things as deeply as they should, their model tells them (to) look at The economy is weak, so we should lower interest rates.

The current target range for the Fed’s benchmark borrowing rate is 5.25%-5.5%.

Stiglitz said that if he served as a Fed policymaker, he would vote for a deeper rate cut at the Fed’s September meeting “because I think they have gone too far and that would actually help.” Addressing inflation and employment issues.

Asked whether that meant he thought a 50 basis point rate cut should be considered regardless of August’s non-farm payrolls data, Stiglitz said: “Yes.”

A Fed spokesman did not immediately comment when contacted by CNBC on Friday.

Market participants firmly expect the Fed to cut interest rates at its next policy-setting meeting, with bets on a half-percentage point cut increasing shortly after Wednesday’s meeting. release Contents of the Job Openings and Labor Turnover Survey (JOLTS) report.

Data showed that U.S. job openings fell to the lowest level in 3.5 years in July, seen as another sign of labor market weakness.

Traders currently see a 59% chance of a 25 basis point rate cut in September and a 41% chance of a 50 basis point rate cut. CME Group’s FedWatch Tool. Betting on a 50 basis point rate cut to 34% Just over a week ago.

Not everyone thinks a big rate cut is necessary this month.

George Lagarias, Chief Economist, Forvis Mazars explain Although no one can guarantee the size of the rate cut at the Fed’s September meeting, he is “firmly” in the camp calling for a 25 basis point rate cut.

“I don’t think a 50 basis point cut is urgent,” Lagarias said Thursday on CNBC’s “Squawk Box Europe.”

“A 50 basis point cut could send the wrong message to markets and the economy. It could send a message of urgency and, you know, it could be a self-fulfilling prophecy,” he continued.

“So if they go there without a specific reason, that’s very dangerous. Unless something happens that troubles the market, there’s no reason to panic.”