The economic data doesn't support an aggressive move down by the Fed, says Roger Ferguson

• Economic data, including a stable labor market (U3 unemployment at 4.3%, robust private sector job creation), strong GDP, and existing wealth effects, does not support aggressive Fed rate cuts.
• Ferguson suggests "maybe one more" rate cut this year, followed by a "wait and see" approach, rather than the market's initial expectation of multiple cuts.
• He cautions that cutting rates in response to AI-driven job losses, if the economy is otherwise strong, could risk stoking inflation, as the Fed's tools are for aggregate demand, not structural labor market changes.
• Market expectations for a June rate cut have fallen below 50%, and a March cut is now off the table, which Ferguson views as an appropriate reaction to the data.

Former Federal Reserve Vice Chairman Roger Ferguson argues that current economic data, including a stable labor market and strong GDP, does not support aggressive Fed rate cuts. He suggests "maybe one more" cut this year, advocating for a "wait and see" approach to avoid stoking inflation, especially given potential productivity gains from AI.