"The strongest rate cut advocate" appears! US Treasury Secretary Bernhardt urges the Federal Reserve to cut rates by 50 basis points in September, at least a total of 1.5 percentage points in this round.

US Treasury Secretary Scott Bessent issued the most explicit call for interest rate cuts by the US government to date, urging the Federal Reserve to immediately start a new round of interest rate cuts. He stated that the Fed's benchmark interest rate should be at least 1.5 percentage points lower than the current high rate level, and he predicted that the first interest rate cut of the year could be as high as 50 basis points in September. This call goes beyond the recent calls by Fed officials for a 25 basis point interest rate cut. Major Wall Street banks such as Goldman Sachs and Citigroup have recently indicated that the Fed's interest rate trajectory this year could follow the same path as last year - starting with a 50 basis point rate cut in September, followed by 25 basis points cuts in November and December. "I believe we may enter a series of interest rate cuts, and it is likely that the Fed will start with a 50 basis point cut in September," Bessent said in an interview on Bloomberg Surveillance on Wednesday. "If you look at any economic model, they all indicate that we may need to lower rates by 150, even 175 basis points." At the previous Fed FOMC monetary policy meeting, policymakers kept their benchmark interest rate in the high target range of 4.25% to 4.5%. Bessent reiterated that if Fed officials had known the significantly revised labor market data that was released two days after that meeting, they may have already started a new round of interest rate cuts. He emphasized that the June Fed FOMC monetary policy meeting could also be a similar scenario - that if the data then showed a severe weakening of the labor market in May and June, the Fed would have already cut rates. "I suspect we could have cut rates in June and July," Bessent said - referring to the data released by the Bureau of Labor Statistics on August 1, which revised down nonfarm payroll employment growth for May and June by 258,000, a revision unprecedented in its magnitude of 90%. US Treasury Secretaries usually avoid making specific calls regarding Fed rates, and Bessent himself has stated in recent months that he would only discuss the central bank's past policy decisions, not future decisions. However, Bessent's latest remarks undoubtedly break with the long-standing understanding between the White House and the Fed on monetary policy comments. US President Donald Trump has repeatedly criticized Fed Chair Jerome Powell for not implementing rate cuts, and in his latest remarks, even stated his plans to sue Powell. Since Trump returned to the White House as President, almost every inflation report, nonfarm employment data, and Fed monetary policy decision has led him to publicly demand significant rate cuts from the Fed, and he has repeatedly criticized Powell. Trump has claimed that the US government is paying huge interest on its debt, and has requested the Fed to lower rates by three percentage points. Wall Street is also discussing whether there should be a 50 basis point rate cut in September. The nonfarm employment data released on August 1 indicates a significant cooling of the labor market in the United States in recent months. Bureau of Labor Statistics data shows that in July, only 73,000 new jobs were added by businesses, far below the expected 110,000; at the same time, the initial values of nonfarm employment for the previous two months were unexpectedly revised downward by nearly 260,000, a revision of 90%. The latest unemployment rate rose from 4.1% in June to 4.2%. Therefore, this nonfarm data has largely prompted traders to heavily bet on a Fed rate cut: pricing in the futures market shows that traders are heavily betting on the restart of the Fed rate cut cycle next month, with the probability of a 25 basis point rate cut by the Fed approaching 100% - compared to less than 40% before the nonfarm report, and betting on at least two more rate cuts before the end of the year, and even betting on consecutive 25 basis point cuts in September and October, leading to a cumulative 75 basis points cut in rates before the end of the year. In addition, more aggressive traders are even betting on a scenario similar to that of 2024 - a 50 basis point rate cut in September, followed by 25 basis point cuts in October and December, meaning a total of 100 basis points of rate cuts before the end of the year. "We still need to remember the situation last summer - the Fed kept rates unchanged in July, but then received weak labor market data and cut rates by 50 basis points in September 2024," wrote economists at Citigroup. Economists at Goldman Sachs, a Wall Street financial giant, stated in a research report that considering the widespread weakness shown in economic data represents a "certain degree of expectation shift," the threshold for pushing for a 50 basis point rate cut should become part of the market's benchmark expectations, rather than the widely expected 25 basis point cut. The market continues to focus on the nomination of the Fed chair. Powell and several of his Fed colleagues have expressed that they want to see more evidence on how Trump's tariffs affect inflation data and consumer inflation expectations - Powell said in July that the impact of tariffs on US inflation has not fully materialized. Bessent stated that there are currently 10 or 11 candidates for Fed chair that President Trump is considering, and he stated that the final nominee will be carefully considered by the Trump administration to eventually take over the position after Powell's term as Fed chair ends in May next year, but he did not list the names one by one. He emphasized that the list of candidates includes both current Fed officials and some of the top economists in the private sector. He also stated that he does not expect Stephen Miran, the nominee personally selected by Trump to fill the existing vacancy on the Fed Board of Governors, to stay at the central bank after his short-term director term ends in January next year. For Wall Street investment firms, they are eager to know the main logic behind the nomination of the Fed chair, as this nomination will determine who will be the "shadow Fed chair" before Powell's term ends. The concept of the "shadow Fed chair" has been put forward by Bessent, and he argued at the time for the early appointment of the next chair so that the "prospective Fed chair" could speak out, participate in policy communications and expectation management during Powell's remaining term, thereby reducing Powell's influence and giving Trump's economic agenda greater control over monetary policy. Bessent believes that the guidance on monetary policy provided by the "shadow Fed chair" is enough to make the market "less concerned about Powell's words."