Carlyle’s David Rubenstein Reportedly Says A 50 Bps Cut Next Week From Fed Would Scare The Markets: Here's Why

Carlyle Group’s co-founder and co-chairman, David Rubenstein, on Thursday reportedly said that a 50-basis-point interest rate cut from the Federal Reserve next week would scare the markets about the state of the U.S. economy.

In an interview with CNBC, Rubenstein stated that the Fed’s monetary policy action next week will be on predictable lines. “Clearly, the Fed next week will obviously do something we all expect. I don’t think it’s going to be a surprise,” he said.

As for the quantum of the interest rate cut, Rubenstein said he believes the central bank will stick with the more widely expected 25-basis-point cut instead of a larger 50-basis-point cut.

“It will have to be 25 basis points. If the Fed were to go 50 basis points, it would scare the markets that the economy is weaker than what the markets think it is, and I think it would be too much for the market to absorb,” Rubenstein added.

As for the Fed’s dual mandate of achieving maximum employment and price stability, Rubenstein argued that the central bank focuses on the aspect that is relatively more out of line than its goals. He added that while unemployment is “not that high right now,” inflation is still above the central bank’s 2% target.

Data from CME Group’s Fedwatch tool indicates a 91.8% probability that the Fed will maintain interest rates at the current 4.25% to 4.5% range.

Meanwhile, U.S. equities gained in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.25%, while the Invesco QQQ Trust (QQQ) rose 0.34%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down 0.08% at the time of writing.

Also See: Dow Futures Edge Higher As Wall Street Awaits Consumer Inflation Data: ORCL, OPEN, KLAR, ADBE Among Stocks To Watch

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