According to the JPMorgan executive, the Fed may go for an emergency interest rate cut.

Bob Michele, the global head of fixed income products at JPMorgan, stated that the Federal Reserve may have to make an emergency interest rate cut before the May meeting due to adverse conditions in the market.

Speaking to Bloomberg, Michele noted that the chaos in the markets since last week has been extremely severe, likening it to historical crises such as the stock market crash of 1987, the financial crisis of 2008, and the turmoil caused by the pandemic in 2020. Reminding that in previous crises the Fed acted quickly to decide on interest rate cuts, Michele expressed that the current market conditions might require a similar intervention, and therefore the Fed cannot afford to wait until May for an interest rate cut. Michele stated, "They don’t have the luxury to wait until the May meeting to start lowering rates."

Fed Chairman Jerome Powell, in his latest public statement, noted that there is no need to rush into interest rate cuts, stating "We have time." Powell emphasized that they would not compromise on their goal of reducing inflation to 2 percent. Michele argues that the Fed's stance is unrealistic and that it is unlikely they will persist in not lowering rates until the meeting on May 7.

"They are talking about the time required for the monetary policy's effects to show, due to long and unchanging delays (. In other words, they say, 'Let's wait until the accident, then respond, and then wait again for the effects of these delays.' I think this makes no sense at all."

The likelihood of the Fed cutting interest rates in May has started to be priced at over 40% today.

Published: April 7, 2025 22:51