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it takes us to our talk of the tape does the market have it right that the FED can go big with its first easing move without sounding an alarmed about the economy and with stocks not far from all-time highs and would such a move be right on time or maybe a bit too late let's ask Wharton School Professor Jeremy seagull uh but first Professor great to have you here I do want to first uh have you listen to what hedge fund giant John Paulson said he spoke with my colleague Sarah Eisen in a rare interview this morning about what he thinks the FED should do at next week's meeting personally I think the FED is a little behind the curve uh you know rates are you know five and a quter plus and inflation's down to the 2 and 1 half% rate so we have almost 3% real interest so I think they've seen enough data uh and that they can start bringing rates down and I I would suggest more aggressively would be better uh so I'd be for a 50 basis point cut rather than 25 Professor seagull what's your what's your take on that and and the fed's calculus going into next week I agree 100% but I don't think they will I I think that it would have to be a really bad retail sales report early next week for them to do 50 um I agree as you know I've been for these aggressive Cuts but uh the deliberateness of jpow is is is 25 basis point uh you know Mike one interesting thing I it is is almost incredible uh the FED funds Futures that reflects the June meeting next year June 2025 is now trading at 3% yeah uh I mean that that is actually more than nine cuts under the current level now I I think there there's there's risk premium in there and I've done some uh taking out some of that risk premium so I I estimate that seven cuts and what's interesting about that is there are exactly seven more meetings uh between uh next week and the June meeting of 2025 so actually a 25 basis point cut in each and every meeting would actually you know bring us down to around three and a half and three and 3/4 and you know I've said that's where the funds rate should be it should be between three and a half and 4% mhm well what's interesting about all that is one as you say the market sometimes will kind of overe extrapolate or build in some kind of a what if premium into the FED funds Futures the other piece of it though is and this is in the last day or two where you had this Wall Street Journal article and an ft article kind of leaning in the direction of 50 basis points these former fed officials were uh giving voice to this idea that they could see the case for half percentage Point move next week and Loretta Meer uh former Cleveland fed president has said as much as did Bill Dudley former New York fed president today and it seemed to me that the market was willing to actually trade higher on that in part because it seemed to lay the groundwork for half a point not being in response to outright weakness in the economy in other words we can have it all we can have a resilient economy and get started on this easing cycle in a bigger way does that make any sense yeah it it does but you know and I know Loretta you know very well um notice that phrase could a case could be made she you know she was really quite hawkish during you know those those early phases of fed increases so you know that's that's certainly something that makes news but I I think of there's a lot of could be Maids I mean I think Austin gouby is is definitely making the case of of of let's be more aggressive there will be a side on that but I just don't think the PPI and CPI were just that good enough again it would have to be a really horrible report don't forget you know the the the the real indicators are holding in at a moderate economy I you know say let's get down to where we should be as fast as possible but the real what what I think the market is saying you know what so it may be a few months longer before we get to where we have to be but if by the middle of next year you know we're 3 and 1 12% funds rate hey I'm good with that
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