Economist El-Erian: Markets exaggerate the extent of the Fed's rate cut

Traders are currently pricing in a 100 basis point rate cut by the end of the year. Economist Mohamed El-Erian said they are overstating the odds of a big rate cut by the Fed before the end of the year: "It seems to me that the market has priced in so many rate cuts right now, and that's problematic." In recent days, traders have solidified bets in the swaps market that the Fed will cut rates by up to 100 basis points by the end of the year, with a 25 basis point or even 50 basis point cut possible in September. Minutes from the Fed's July meeting showed several officials saw a rate cut as a possibility next month, while the latest employment data showed job growth was far less robust than previously reported, further suggesting a rate cut is all but certain. According to El-Erian, the Fed will cut rates by 75 basis points by the end of the year. "There's a view that to achieve a soft landing with a hard landing policy, the two need to be reconciled in some way," he said. "The market will adjust one day." (Jin Shi)