Finance
Sahm rule creator doesn’t think that the Fed needs an emergency rate cut
The U.S. Federal Reserve does not need to make an emergency rate cut, despite recent weaker-than-expected economic data, according to Claudia Sahm, chief economist at New Century Advisors.
Speaking to CNBC “Street Signs Asia,” Sahm said “we don’t need an emergency cut, from what we know right now, I don’t think that there’s everything that will make that necessary.”
She said, however, there is a good case for a 50-basis-point cut, adding that the Fed needs to “back off” its restrictive monetary policy.
While the Fed is intentionally putting downward pressure on the U.S. economy using interest rates, Sahm warned the central bank needs to be watchful and not wait too long before cutting rates, as interest rate changes take a long time to work through the economy.
“The best case is they start easing gradually, ahead of time. So what I talk about is the risk [of a recession], and I still feel very strongly that this risk is there,” she said.
Sahm was the economist who introduced the so-called Sahm rule, which states that the initial phase of a recession has started when the three-month moving average of the U.S. unemployment rate is at least half a percentage point higher than the 12-month low.
Lower-than-expected manufacturing numbers, as well as higher-than-forecast unemployment fueled recession fears and sparked a rout in global markets early this week.
The U.S. employment rate stood at 4.3% in July, which crosses the 0.5-percentage-point threshold. The indicator is widely recognized for its simplicity and ability to quickly reflect the onset of a recession, and has never failed to indicate a recession in cases stretching back to 1953.
When asked if the U.S. economy is in a recession, Sahm said no, although she added that there is “no guarantee” of where the economy will go next. Should further weakening occur, then it could be pushed into a recession.
“We need to see the labor market stabilize. We need to see growth level out. The weakening is a real problem, particularly if what July showed us holds up, that that pace worsens.”
Jakub Porzycki | Nurphoto | Getty Images
LONDON — Britain’s financial services watchdog on Monday announced a new tie-up with U.S. chipmaker Nvidia to let banks safely experiment with artificial intelligence.
The Financial Conduct Authority said it will launch a so-called Supercharged Sandbox that will “give firms access to better data, technical expertise and regulatory support to speed up innovation.”
Starting from October, financial services institutions in the U.K. will be allowed to experiment with AI using Nvidia’s accelerated computing and AI Enterprise Software products, the watchdog said in a press release.
The initiative is designed for firms in the “discovery and experiment phase” with AI, the FCA noted, adding that a separate live testing service exists for firms further along in AI development.
“This collaboration will help those that want to test AI ideas but who lack the capabilities to do so,” Jessica Rusu, the FCA’s chief data, intelligence and information officer, said in a statement. “We’ll help firms harness AI to benefit our markets and consumers, while supporting economic growth.”
The FCA’s new sandbox addresses a key issue for banks, which have faced challenges shipping advanced new AI tools to their customers amid concerns over risks around privacy and fraud.
Large language models from the likes of OpenAI and Google send data back to overseas facilities — and privacy regulators have raised the alarm over how this information is stored and processed. There have meanwhile been several instances of malicious actors using generative AI to scam people.
Nvidia is behind the graphics processing units, or GPUs, used to train and run powerful AI models. The company’s CEO, Jensen Huang, is expected to give a keynote talk at a tech conference in London on Monday morning.
Last year, HSBC’s generative AI lead, Edward Achtner, told a London tech conference he sees “a lot of success theater” in finance when it comes to artificial intelligence — hinting that some financial services firms are touting advances in AI without tangible product innovations to show for it.
He added that, while banks like HSBC have used AI for many years, new generative AI tools like OpenAI’s ChatGPT come with their own unique compliance risks.
Robinhood shares drop after the online brokerage fails to get the nod to join the S&P 500
Job market is ‘trash’ right now, career coach says — here’s why
UK’s FCA teams up with Nvidia to let banks experiment with AI
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Blog Post1 week agoCommon Bookkeeping Challenges and Solutions for Small Businesses
-
Economics1 week agoWhy the president must not be lexicographer-in-chief
-
Finance1 week agoThis is why Jamie Dimon is so gloomy on the economy
-
Personal Finance1 week agoU.S. birth rate drop outpaces policy response, raising future concerns
-
Accounting1 week agoSteinhoff fraud trial moved to South Africa’s high court
-
Personal Finance7 days agoWhat the national debt, deficit mean for your money
-
Personal Finance1 week agoHow to save on summer travel in 2025
-
Personal Finance1 week agoDenmark raises retirement age to 70; U.S. might follow