A Wall Street candidate for Fed chairman voiced support for a significant rate cut
2025-08-15 15:18:03
Wall Street veteran David Zervos on Thursday joined the list of potential Fed chairmen who believe the Fed should have approved a rate cut sooner.
The chief market strategist at Jefferies said central bankers shouldn't be deterred by higher-than-expected inflationary pressures indicated by the July producer price index.
Instead, he advocated that the Fed be aggressive in easing now to prevent a slowdown in the labor market and actually help create more than 1 million jobs. He has advocated for a 0.5% cut in the federal funds rate at the past three Fed meetings, a stance he reiterated.
“I’m absolutely still there,” he said. “I think there’s a reasonable and very compelling storyline that suggests monetary policy is restrictive. Overall, I don’t see any reason why this PPI number would change that view.”
There were originally only three or four people to succeed Federal Reserve Chairman Jerome Powell when his term expires next year, but the process has expanded to nearly 12 people in recent days.
Besides Zervos, there are current and former Federal Reserve officials, at least one Trump administration adviser and several prominent Wall Street economists. Of this group, Zervos and BlackRock bond strategist Rick Rieder are the only two whose backgrounds are more focused on markets than economics.
“I think it would be an incredibly good thing to have more people who understand the markets and have more market power involved in monetary policy decisions,” Zervos said.
Economist Marc Sumerlin, also on the shortlist, backed a 50 basis point rate cut and said the Fed has been too conservative in its fight against inflation.
President Trump has been pushing the Fed to cut interest rates, repeatedly slamming Powell and suggesting the Federal Open Market Committee cut the funds rate, currently around 4.33%, by as much as 3%, or 300 basis points.
“I don’t know if it can go all the way to 300 basis points, but I can certainly get to 200 basis points, and if you really push the AI and tech story and the idea that we’re facing increasing deflationary pressures from the supply side, I would probably believe it’s below that,” he said.
He added that he was not intimidated by Trump's criticism of the Fed.
"You fully understand that you are participating in the political process, and the goal is to let the facts drive the debate and be guided by what is best to achieve the mission mandated by Congress," he said.
The chief market strategist at Jefferies said central bankers shouldn't be deterred by higher-than-expected inflationary pressures indicated by the July producer price index.
Instead, he advocated that the Fed be aggressive in easing now to prevent a slowdown in the labor market and actually help create more than 1 million jobs. He has advocated for a 0.5% cut in the federal funds rate at the past three Fed meetings, a stance he reiterated.
“I’m absolutely still there,” he said. “I think there’s a reasonable and very compelling storyline that suggests monetary policy is restrictive. Overall, I don’t see any reason why this PPI number would change that view.”
There were originally only three or four people to succeed Federal Reserve Chairman Jerome Powell when his term expires next year, but the process has expanded to nearly 12 people in recent days.
Besides Zervos, there are current and former Federal Reserve officials, at least one Trump administration adviser and several prominent Wall Street economists. Of this group, Zervos and BlackRock bond strategist Rick Rieder are the only two whose backgrounds are more focused on markets than economics.
“I think it would be an incredibly good thing to have more people who understand the markets and have more market power involved in monetary policy decisions,” Zervos said.
Economist Marc Sumerlin, also on the shortlist, backed a 50 basis point rate cut and said the Fed has been too conservative in its fight against inflation.
President Trump has been pushing the Fed to cut interest rates, repeatedly slamming Powell and suggesting the Federal Open Market Committee cut the funds rate, currently around 4.33%, by as much as 3%, or 300 basis points.
“I don’t know if it can go all the way to 300 basis points, but I can certainly get to 200 basis points, and if you really push the AI and tech story and the idea that we’re facing increasing deflationary pressures from the supply side, I would probably believe it’s below that,” he said.
He added that he was not intimidated by Trump's criticism of the Fed.
"You fully understand that you are participating in the political process, and the goal is to let the facts drive the debate and be guided by what is best to achieve the mission mandated by Congress," he said.
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