Fed Chair Contender David Zervos of Jefferies Supports Aggressive Interest Rate Cuts

Wall Street veteran David Zervos, chief market strategist at Jefferies, has added his name to the growing list of potential candidates to become the next Federal Reserve Chair. He believes the Federal Reserve is overdue for approving an interest rate reduction to help ease economic pressures. Despite recent data from July’s producer price index showing stronger-than-expected pipeline inflation pressures, Zervos argues that central bankers should not be discouraged. He maintains that monetary policy remains restrictive and that an aggressive rate cut is necessary to prevent a labor market slowdown and support job creation.

Zervos has consistently advocated for a half-percentage-point cut in the federal funds rate over the past three Fed meetings. He reiterated this position in a recent interview, stating, “I’m still absolutely there.” He pointed out that the recent inflation numbers do not change his view that the Fed’s policy stance is too tight. According to him, a timely rate cut could help sustain economic momentum and potentially create a million new jobs.

The selection process to find Jerome Powell’s successor as Fed Chair has expanded rapidly. Initially, there were just three or four candidates, but now the list has grown to nearly a dozen names. This list includes current and former Fed officials, a Trump administration advisor, and several well-known Wall Street economists. Among these contenders, Zervos and BlackRock bond strategist Rick Rieder stand out as the only candidates whose expertise is more market-focused than purely economic.

Zervos emphasizes the importance of having more market-savvy individuals involved in monetary policy decisions. He believes this market knowledge would greatly benefit the Fed’s approach to managing the economy. “I think it would be an incredible benefit to have more market-savvy, more market-competent people involved in the monetary policy decision,” he said.

On the same day, economist Marc Sumerlin, also on the list of finalists, publicly supported a half-point rate cut and criticized the Fed for being overly conservative in its inflation-fighting efforts. This growing consensus among candidates reflects a shift toward more aggressive easing policies in response to economic challenges.

President Donald Trump has been vocal in his demand for the Fed to cut interest rates sharply. He has repeatedly criticized Powell and urged the Federal Open Market Committee (FOMC) to slash rates by as much as 3 percentage points (300 basis points). Currently, the federal funds rate stands at around 4.33%. Zervos acknowledged Trump’s push but expressed some skepticism about the full 300 basis point cut, stating he could see the Fed going as far as 200 basis points if supported by strong technological and AI-driven disinflationary trends. He emphasized that supply-side factors could also help ease inflation pressures.

Despite the political pressure and public criticism from figures like Trump, Zervos remains undeterred. He understands the inherently political nature of the Fed Chair role but insists that decisions should be grounded in facts and focused on fulfilling the mandates set by Congress. “You go into that job fully understanding that you’re involved in the political process,” he said. “The goal is to have the debate be driven by facts and be driven by what is best for achieving the mandates that Congress sets out.”

In summary, David Zervos advocates for a proactive and aggressive interest rate cut to support the labor market and job creation. He joins a broader field of candidates pushing for easier monetary policy amidst ongoing inflation concerns and political debates. His market-focused perspective and willingness to face political challenges highlight the complexities involved in guiding the Federal Reserve’s next phase.