On Thursday, August 14, David Zervos, the chief market strategist of Jefferies Group and a candidate for the Federal Reserve chairmanship, expressed his belief that the Fed should have lowered interest rates earlier and called for more aggressive rate cuts.
During an interview with CNBC, Zervos pointed out that despite the higher-than-expected upstream inflation pressure indicated by the U.S. Producer Price Index (PPI) for July, central bank officials should not hesitate. Instead, he advocated for the Fed to implement a more aggressive loose monetary policy now to prevent a slowdown in the labor market and to promote the creation of millions of job opportunities.
Regarding the three recent Federal Reserve interest rate meetings, he stated that he has consistently advocated for a one-time half-point rate cut. In this interview, he reiterated this stance.
“I still stand by my viewpoint. I believe I have a logical and persuasive theory that explains the current monetary policy being too tight,” he said. “Overall, I don’t think this PPI figure will change my perspective.”
According to a CNBC report on Wednesday, August 13, Jerome Powell’s term as the current Federal Reserve chairman is set to expire next year. Originally, there were only three to four candidates to succeed him, but the number has recently expanded to eleven, with Zervos being one of them. The candidates include current and former Fed officials, a Trump administration advisor, and several prominent Wall Street economists. Zervos and BlackRock bond strategist Rick Rieder have backgrounds more focused on markets rather than economics.
Zervos said, “I believe that having more market-savvy and competitively minded individuals involved in monetary policy decisions would be very beneficial.”
On the same day, another economist on the final candidate list, Marc Sumerlin, also expressed support for a half-point rate cut and criticized the Fed for being too conservative in combating inflation.
Since taking office, President Trump has repeatedly urged the Fed to cut interest rates, criticized Powell on numerous occasions, and suggested that the Federal Open Market Committee (FOMC) lower the federal funds rate by 3 percentage points, or 300 basis points. At the end of July, the Fed once again kept the benchmark interest rate unchanged in the range of 4.25% to 4.5%, but two officials have publicly voted in favor of a rate cut.
Zervos stated, “I’m not sure if I support a 300 basis point reduction, but I can definitely accept a 200 basis point cut. If artificial intelligence (AI) and technological advancements are taken into consideration and it is believed that deflationary pressures are forming on the supply side, then I might be convinced to further lower rates.”
Regarding Trump’s various criticisms of the Fed, Zervos said that they do not intimidate him.
“When you’re the Fed chairman, you fully understand that you have become part of the political agenda,” he said. “The goal is to build debates based on facts and prioritize completing the tasks assigned by Congress.”