{"id":2419,"date":"2025-12-10T18:36:09","date_gmt":"2025-12-10T18:36:09","guid":{"rendered":"https:\/\/microvibenews.com\/?p=2419"},"modified":"2025-12-10T18:36:09","modified_gmt":"2025-12-10T18:36:09","slug":"top-economist-warns-more-rate-cuts-after-today-would-signal-the-economy-is-in-danger","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=2419","title":{"rendered":"Top economist warns more rate cuts after today would signal the economy is in danger"},"content":{"rendered":"

<\/p>\n

Claudia Sahm thinks investors should rethink what they\u2019re salivating for.<\/p>\n

\n

The Federal Reserve is likely to deliver its third interest rate cut of the year on Wednesday, a move widely understood to be insurance against the bottom completely falling out of the labor market. But to Sahm\u2014a former Fed economist, recession-indicator architect, and one of the central bank\u2019s most closely watched outside interpreters\u2014the more consequential question isn\u2019t what the Fed does on Wednesday. It\u2019s what additional cuts would mean.<\/p>\n

\u201cIf the Powell Fed ends up doing a lot more cuts,\u201d she told Fortune<\/em> ahead of the decision, \u201cthen we probably don\u2019t have a good economy. Be careful what you wish for.\u201d<\/p>\n

That framing cuts against the dominant mood on Wall Street, where rate cuts have recently been reflexively welcomed and futures markets are already pricing in a second round of easing in 2026. But Sahm thinks investors should only want more cuts if they\u2019re prepared to cheer for a recession.<\/p>\n

Powell\u2019s last stretch, and the hardest one<\/strong><\/h2>\n

Sahm expects the Fed\u2019s cut today\u2014almost universally anticipated in futures markets\u2014to be paired with language that raises the bar for any move in January. With the core inflation rate still sticky at 2.8%, higher than the Fed\u2019s preferred rate of 2%, and unemployment rising, the Fed is straddling both halves of its mandate.\u00a0<\/p>\n

\u201cIt is a tough one,\u201d Sahm said. \u201cWhatever they do could upset the other side.\u201d<\/p>\n

That tension is especially sharp because Fed Chair Jerome Powell is nearing the end of his term. He has three meetings left\u2014January, March, and April\u2014before the administration installs a successor, but President Donald Trump will announce his pick for the new chair (widely believed to be White House advisor Kevin Hassett) around Christmas. Once he does that, Powell effectively becomes a \u201clame duck\u201d Fed Chair, although Sahm notes that \u201cfrankly, he has been one for some time\u201d since Trump, who has grown to loudly despise his nominee, was elected.\u00a0<\/p>\n

\u201cFeels like in a way the last Powell Fed meeting,\u201d Bloomberg<\/em>\u2019s Conor Sen wrote on X.\u00a0<\/p>\n

What matters now for Sahm is that the data\u2014not the politics\u2014are driving policy. She warns that could change next year with a more political Fed.\u00a0<\/p>\n

The labor-market signal the Fed is watching<\/strong><\/h2>\n

What Sahm is focused on is not the headline rate cut but the underlying fragility in the job market that the Fed is trying to insure against.<\/p>\n

Unemployment has risen three months in a row through September. Hiring has slowed to levels that historically place upward pressure on unemployment, \u201cbecause you always have people coming into the labor market,\u201d she said.\u00a0<\/p>\n

Layoffs, however, haven\u2019t surged yet. That\u2019s precisely why Sahm thinks relying on initial jobless claims to assess labor-market risk is dangerous.\u00a0<\/p>\n

\u201cInitial claims don\u2019t give you a sense of what\u2019s coming,\u201d she said. They\u2019re what economists like to call a lagging indicator, meaning they tend to spike after a recession is underway, not before it. Recent weekly readings, distorted by holidays and special factors, are even less informative.<\/p>\n

The real risk, in her view, is that the Fed waits too long.<\/p>\n

\u201cIf the Fed waits until they see signs of deterioration,\u201d she said, \u201cthey\u2019ve waited too long.\u201d<\/p>\n

Sahm expects Powell to keep the path open for more easing but to emphasize that each additional cut requires stronger justification.<\/p>\n

\u201cIf Powell talks about the funds rate getting close to neutral,\u201d Sahm said, \u201cthat tells you it\u2019s a pretty high bar to keep cutting. Every cut takes pressure off the economy, and inflation is still elevated.\u201d\u00a0<\/p>\n

That messaging\u2014tightening the bar while remaining data-dependent\u2014is what Wall Street might interpret as a \u201chawkish cut.\u201d<\/p>\n

But Sahm stresses the Fed cannot box itself in. The December employment report arrives just a week after today\u2019s press conference. Declaring victory\u2014or declaring the cutting cycle finished\u2014would expose Powell to being immediately flat-footed.<\/p>\n

\u201cIf all goes well,\u201d she said, \u201cthis could be the last cut of the Powell Fed.\u201d<\/p>\n<\/div>\n

#Top #economist #warns #rate #cuts #today #signal #economy #danger<\/p>\n","protected":false},"excerpt":{"rendered":"

Claudia Sahm thinks investors … <\/p>\n","protected":false},"author":1,"featured_media":2420,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[550,2503,486,2192,617,2185,1542,176,1553,2187,522,827,2188,126,2502,1576,187,829,613],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/2419"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2419"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/2419\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/2420"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2419"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2419"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2419"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}