Former "Hawk King" of the Federal Reserve: Cut interest rates by 25 basis points tonight, otherwise unable to defend

With only a few hours left before the Federal Reserve announces its interest rate decision, former St. Louis Fed President Bullard stated that the Fed should cut rates by 25 basis points today, and emphasized that the rationale for a 50 basis point cut has been exaggerated.

In the view of this "former hawk", the Fed cannot justify a 50 basis point rate cut. He said, "If the Fed plans to cut rates by 50 basis points, it will quickly raise the question: why not maintain this strong pace at future meetings?"

Jon Hilsenrath, a Wall Street Journal reporter known as the "Fed Whisperer" during the Bernanke era, also stated in an interview on Wednesday that if the Fed cuts rates by 25 basis points, "the message will be much easier to convey", as Powell can still prove the economy is strong and they don't need to rush to cut rates.

He said that if the Fed chooses to cut rates by 50 basis points, Fed Chair Powell may have to answer questions about whether the action is too aggressive or if concerns about a slowdown in the economy are more challenging than imagined. Shortly after the Federal Open Market Committee (FOMC) announces its rate decision, Powell will answer questions from reporters.

Nevertheless, Hilsenrath believes that the Fed will cut rates by 50 basis points. Prior to this, well-known journalists such as Nick Timiraos from the "New Fed Whisperer" have also hinted at the possibility of a 50 basis point rate cut. Former New York Fed President Dudley has repeatedly called on the Fed to take bolder actions since last week.

These remarks have fueled market bets on a 50 basis point rate cut, overshadowing expectations for a 25 basis point cut. Federal funds futures traders even expect the Fed's rate cuts this year to total 115 basis points.

However, Matthew Ryan, market strategist at global financial services company Ebury, warned that the FOMC is unlikely to endorse this expectation.

Ryan stated that after the Fed issues its policy statement, Powell is "unlikely to rock the boat too much at the subsequent press conference, and may largely reiterate his remarks at the Jackson Hole Symposium. He may clearly indicate to the market that further rate cuts are forthcoming, and may suggest that each meeting this year is 'live'."

Ebury expects the Fed to cut rates by 25 basis points later and suggest that further cuts will be gradual, providing some short-term support for the dollar. Ryan stated that the Fed may cut rates by 25 basis points in September, November, and December