Dudley Sees Case for Half-Point Fed Rate Cut Next Week

The former New York Fed President says the central bank "should do everything it can" to prevent a recession.

William Dudley, the former president of the Federal Reserve Bank of New York, said on Monday that he believes the central bank should cut interest rates by a half-point at its next meeting in order to prevent a recession.

Dudley, who is now a senior research scholar at Princeton University, said in an interview with Bloomberg Television that he thinks the Fed should "do everything it can" to avoid a recession.

According to Bloomberg, Dudley said, "I think they should do 50 basis points this time. I think they should err on the side of doing too much rather than too little."

The Fed is widely expected to raise interest rates by a quarter-point at its next meeting on Aug. 1. However, some economists believe the central bank could opt for a more aggressive half-point hike in order to combat rising inflation.

The Fed has already raised interest rates four times this year, and Dudley said he believes the central bank will need to continue raising rates in order to bring inflation under control.

"I think they're going to have to raise rates more than they would like to," Dudley said.

However, Dudley warned that the Fed needs to be careful not to raise rates too quickly, as this could lead to a recession.

"I think the Fed is going to have to be very careful about how they do this," Dudley said. "They're going to have to be very data-dependent and they're going to have to be very cautious."