Stiglitz urges Fed to cut rates amid economic concerns

Nobel Prize-winning economist Joseph Stiglitz has called for a significant half-point interest rate cut by the Federal Reserve at its upcoming meeting, arguing that the central bank has tightened monetary policy too aggressively. His remarks come just before the release of crucial U.S. jobs data, which investors are watching closely for insights into the potential size of the rate cut. Stiglitz believes that the Fed's previous actions have exacerbated inflation, particularly due to rising housing costs, and that a larger cut could help alleviate both inflation and job market issues. Market participants are increasingly anticipating a rate cut, with a notable shift in expectations following the recent Job Openings and Labor Turnover Survey, which indicated a decline in job openings to a three-and-a-half-year low. Currently, there is a 59% probability of a 25-basis-point cut and a 41% chance of a 50-basis-point reduction, according to the CME Group's FedWatch Tool. This reflects a growing sentiment among investors that the Fed may need to act more decisively to support the economy. Stiglitz's perspective aligns with other economists, including JPMorgan's chief U.S. economist, who also advocate for a more substantial rate cut. He emphasizes the importance of normalizing interest rates but criticizes the Fed for going too far in its tightening measures, which he believes have put the economy at risk without delivering significant benefits. The debate over the appropriate scale of the rate cut continues, with some economists cautioning against a drastic reduction, arguing it could send the wrong message to markets. As the Fed's September meeting approaches, the economic landscape remains uncertain, and the decisions made will have significant implications for inflation and employment moving forward.