MNI INTERVIEW: Fed Likely To Make Series of 25bp Cuts- Blinder

MNI (JACKSON HOLE, WYO.) - The Federal Reserve is likely to make a series of quarter-point cuts to benchmark interest rates starting September after Chair Jerome Powell said Friday his confidence has grown that inflation is under control, former Fed vice chair Alan Blinder told MNI on the sidelines of the Jackson Hole symposium. 

"They could cut at each of the three remaining meetings this year," Blinder said in an interview. "I’m still a little dubious about the November meeting because it’s literally the day after the election. I think I'd bet against November, but by a narrow margin. If there’s no election I think they would." 

A larger 50 bp move is unlikely unless the labor market appears to be deteriorating quickly, Blinder said. 

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"I think 50 would be interpreted in many quarters as the Fed is very, very nervous," he said. "They don’t want to give people the impression it’s all hands on deck at the firehose, because it’s not." (See: MNI INTERVIEW: Fed's Harker Ready To Start 'Methodical' Cuts )

Starting the cutting cycle next month likely puts the Fed a little behind the curve, but not by too much, said Blinder, who had urged a cut ahead of the July meeting. 

"They’re probably going to get some more weakening in the labor market," he said. A further uptick in unemployment toward 5% is a possibility and would not be viewed favorably by Powell's Fed, Blinder added.  

"There would have been previous Feds that would have been happy with that. They won’t be that happy. I think they want it to stop at 4.5-ish. There’s a tendency to think of that as worse news than it really is," he said. "A little more cooling in the labor market I think would be welcome."