St. Louis Fed President James Bullard voted for a -50bps rate cut earlier this week, dissenting other’s decisions of -25bps cut. He explained that a large cut “would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks.” And, “it is prudent risk management, in my view, to cut the policy rate aggressively now and then later increase it should the downside risks not materialize.”

He also noted that “many estimates of recession probabilities have risen from low to moderate levels.” In particular, data pointed to a contraction in manufacturing. Meanwhile, “the yield curve is inverted, and our policy rate remains above government bond yields”.

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