US likely to cut rates 3 times this year as inflation cools, says former Fed vice-chair

Name: SCMP
Telephone: +852-2680-8888

‘Real possibility’ of a third cut as inflation heads downward and the labour market cools, says Richard Clarida, who was Fed vice-chair from 2018 to 2022

Reading Time:2 minutes

Why you can trust SCMP

With inflation returning close to target, the Fed has begun to elevate the importance it places on the employment data, Clarida said. Photo: AP

Aileen Chuang

Published: 6:00am, 22 Jul 2024

The Federal Reserve is likely to cut interest rates three times this year as inflation heads downward and the labour market cools, according to Richard Clarida, who was vice-chair of the US central bank from 2018 to 2022.

Any further improvements in inflation data and increases in the unemployment rate in the US will inform the Fed’s decision, Clarida, currently the global economic adviser for asset management giant Pimco, said in an interview in Hong Kong.

Pimco’s forecast is for two rate cuts, with “a real possibility of a third,” he said.

“Since May, the inflation data and the employment data have been very Fed-friendly,” he added. “Over the last three months, inflation is now running around 2 per cent again and the labour market has come into better balance.”

Clarida said that with inflation returning close to target, the Fed has begun to elevate the importance it places on the employment data.

01:15

China posts 4.7% second-quarter growth, lower than expected

Earlier this month, Fed Chair Jerome Powell testified before Congress that the labour market was “strong but not overheated” and the US economy was no longer overheated, raising the prospects of an interest-rate cut.