Former New York Federal Reserve President Bill Dudley said that the latest US economic data strengthened the arguments in favor of easing the Fed's monetary policy by 0.5%.
"I think there are strong arguments in favor of an interest rate cut of 0.5%, regardless of whether the Fed is going to do it or not," Dudley said, adding that interest rates currently exceed the so-called neutral rate - when policy is neither restrictive nor adaptive to the economy - by 1.5%-2%.
Earlier, Dudley called on the Fed to begin the process of easing monetary policy in July. Meanwhile, yesterday's report on jobless claims and the Wall Street Journal article on the Fed's rate cut dilemma revived bets on a jumbo cut at the September meeting. According to the CME FedWatch Tool, markets see a 43% probability of a 0.5% rate cut in September (up from 30% the week before), and a 57% probability of a 0.25% rate cut (down from 70% the week before), with a 1.16% rate cut expected by the end of the year.