On August 15, the Financial Associated Press reported (Editor: Liu Rui) that on Thursday, Eastern Time, David Zervos, Chief Market Strategist at Jefferies and a veteran on Wall Street, expressed his agreement with Trump's view that the Federal Reserve should have significantly cut interest rates earlier.
Notably, in recent reports, he is one of the potential candidates to become the next chairman of the Federal Reserve.
In favor of significant rate cuts by the Federal Reserve
On Thursday, the latest U.S. Producer Price Index (PPI) for July was announced, showing a year-on-year increase of 3.3%, far exceeding market expectations of 2.5%; the core PPI increased by 3.7% year-on-year, also higher than the market expectation of 3%.
Zervos stated that although the U.S. July PPI shows that potential inflationary pressures in the U.S. may be higher than expected, Federal Reserve officials should not be intimidated by this.
On the contrary, he advocates for the Federal Reserve to actively take easing measures now to prevent a slowdown in the labor market.
In fact, during the past three Federal Reserve meetings, Zervos has consistently advocated for a 50 basis point reduction in the federal funds rate. He reiterated this view on Thursday.
"I absolutely still hold this view. I believe there is reasonable and very compelling evidence that monetary policy is tightening... Overall, I see no reason to change this view."
Should the rates be cut by at least 200 basis points?
Federal Reserve Chairman Powell is set to complete his term in May next year. According to two unnamed Trump administration officials, Trump is considering 11 candidates to replace Powell, including current and former Federal Reserve officials, several well-known Wall Street economists, and at least one economic advisor from the Trump administration.
Zervos from Jefferies and Rick Rieder, a bond strategist at BlackRock, are also among them, and they are the only two candidates on the list with backgrounds more focused on the market rather than the economy.
Zervos is clearly eager to be a candidate for the Federal Reserve chair. He stated: "I think it would be incredibly beneficial to involve more people who understand the market and have market capabilities in monetary policy decision-making."
Earlier that day, economist Marc Sumerlin, also on the candidate list, stated that he supports a 50 basis point rate cut and believes the Federal Reserve is too conservative in combating inflation.
Previously, Trump had been actively pushing for rate cuts from the Federal Reserve, repeatedly criticizing Powell and suggesting that the FOMC should reduce the Federal Reserve's federal funds rate by 3 percentage points, or 300 basis points.
Zervos commented on this:
"I don't know if we can achieve a 300 basis point cut, but I definitely should be able to cut by 200 basis points. Considering the narrative of artificial intelligence and technology, and the idea that we are facing deflationary pressures from the supply side, I might agree to lower rates even further."
Zervos added that he was not intimidated by Trump's criticisms of the Federal Reserve.
He stated: "You should fully understand that you are participating in a political process... Our goal is to make the debate fact-oriented and directed towards accomplishing the tasks set by Congress."