Potential candidates for Federal Reserve chair discuss rate cuts: can cut rates by 50 basis points next month, but the rise in the 10-year yield must be stopped.

Economist Marc Sumerlin, seen as a potential candidate for the next Federal Reserve chairman, said that policymakers should cut interest rates significantly next month, but warned that they must stop cutting rates if long-term government bond yields rise. The founder of Evenflow Macro Advisory, in an interview, stated: "The weakest link in the current market is the real estate sector, so we cannot allow long-term rates to rise - that is the current constraint on policy." Sumerlin's comments were aimed at the situation that occurred last year: when the Fed cut rates by 50 basis points in September, followed by two more rate cuts, but at the same time the ten-year government bond yield did not fall, but rose. This rise in long-term rates pushed up mortgage rates tied to them. Sumerlin's analysis indicates that, based on the short-term government bond yield curve, the Fed has room to cut rates by 50 basis points at the next meeting. He pointed out that the current Fed target overnight rate range is 4.25%-4.5%, while the six-month government bond yield is only 3.94%. "One of the reasons I support an immediate 50 basis point rate cut is because of the inversion at the front end of the yield curve - recent data shows an inversion of about 60 basis points, which means that a rate cut of this magnitude will not actually disrupt the market." "A simple choice" When asked how to respond if the ten-year yield rises after a 50 basis point rate cut next month, Sumerlin said: "Just stop cutting rates." "It's as simple as that," he emphasized. Federal Reserve policymakers have kept rates unchanged this year to observe the impact of Trump's tariff policy on inflation and employment. However, the weaker than expected jobs report has increased the likelihood of a rate cut in September. Currently, market pricing shows a probability of over 90% for a rate cut next month. At the July meeting, Fed governors Bullard and Bowman dissented, advocating for a 25 basis point rate cut. It has been reported that Sumerlin has been included in the list of candidates to succeed Chairman Powell in May next year. He previously served as an economic policy advisor in the George W. Bush administration.