Deutsche Bank refutes U.S. Treasury Secretary's argument for interest rate cuts, stating that the current Intrerest Rate aligns with model expectations.

On August 20, Deutsche Bank interest rate strategists stated that U.S. Treasury Secretary Basant's view that the Fed's interest rate is more than one percentage point above the appropriate level shown by the model is incorrect. Basant had previously stated that "whatever model" suggests that the interest rate "should be 150 to 175 basis points lower." However, since then, the search for models that support this claim has been fruitless, and a team of Deutsche Bank strategists led by Matthew Raskin has recently joined this verification effort.

Raskin, a former economist and advisor at the Fed, and his team stated in a report on Tuesday that the rules used by the Fed in its semiannual monetary policy report "do not clearly point to a need for interest rate cuts, let alone cuts of 150 to 175 basis points."

They stated: "It should be noted that the current federal funds interest rate is exactly within the relatively narrow range specified by the rules," which is roughly between 4% and 4.65%, indicating that a rate cut of 25 basis points "may be reasonable."