Economist Marc Sumerlin, viewed as a potential candidate for the next Federal Reserve chair, stated that policymakers should implement substantial rate cuts next month but warned that they must halt further cuts if long-term bond yields rise. The founder of Evenflow Macro consulting firm noted in an interview: "The weakest segment of the current market is real estate, so we absolutely cannot allow long-term rates to move higher—that's the current policy constraint."

Sumerlin's remarks address the situation that emerged last year when the Federal Reserve cut rates by 50 basis points in September and continued with two additional cuts, yet 10-year Treasury yields rose during the same period rather than declining. This increase in long-term rates pushed up mortgage rates that are tied to these yields.

According to Sumerlin's analysis, the short-term Treasury yield curve indicates the Fed has room for a 50 basis point cut at its next meeting. He pointed out that the current Fed benchmark overnight rate target range stands at 4.25%-4.5%, while the six-month Treasury yield is only 3.94%. "One reason I support an immediate 50 basis point cut is the inversion at the front end of the yield curve—recent data shows an inversion of approximately 60 basis points, meaning such a magnitude of cuts wouldn't truly disrupt markets."

When asked how to respond if 10-year yields rise following a 50 basis point cut next month, Sumerlin stated: "Then stop cutting rates."

"Must stop cutting rates, it's that simple," he emphasized.

This year, Federal Reserve policymakers have maintained unchanged rates to observe the impact of Trump's tariff policies on inflation and employment. However, weaker-than-expected employment reports have increased the likelihood of September rate cuts. Current market pricing shows a probability exceeding 90% for rate cuts next month.

At the July meeting, two Fed governors, Waller and Bowman, dissented and advocated for 25 basis point cuts. Reports indicate that Sumerlin has been included on the candidate list to replace Chair Powell next May, having previously served as an economic policy advisor in the George W. Bush administration.