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#JPMorgan executive Bob Michele said that the severe turmoil in the market at the Fed's May meeting could force an emergency rate cut. Giving signs that show similarities with historical crises, Michele said, "They don't have the luxury of waiting until the May meeting." He defended the Fed's quick decision-making.
JPMorgan's global head of fixed-rate products Bob Michele said that the US central bank #Fed may have to make an emergency rate cut before the May meeting due to bad conditions in the market.
Speaking to Bloomberg, Michele noted that the chaos that has been going on in the market since last week is extremely severe, and that it is following behaviors similar to unexpected crises such as stock market activities in 1987, financial crises in 2008 and the pandemic turmoil in 2020.
Recalling the Fed's rapid interest rate cut closure in previous crises, Michele stated that current market conditions may also require a similar intervention, and therefore the Fed cannot wait until May to cut interest rates. Michele said, “They don’t have the luxury of waiting until the May meeting.”
Fed Chairman Jerome Powell stated in his latest public statement that there was no need to rush to cut interest rates. Powell had outlined that they would compromise on the goal of bringing inflation down to 2 percent. Michele, on the other hand, argues that this stance by the Fed is far from freedom and that it is not possible for them to insist on not cutting interest rates until the meeting to be held on May 7:
“They are talking about long and continuous delays (during the time required to display monetary policy). In other words, they are saying, ‘Let’s wait until the crash, then respond, then wait for the expense of these delays again.’ I don’t think this is economical at all.”
The probability that the Fed will cut interest rates in May has started to be priced in at over 40 percent in the markets today.
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