Developer of the 'Sam Law' Says "Fed, No Need for Emergency Rate Cut"

"Not Entering Recession... Just Need a Big Cut in September"

Claudia Sahm, the chief economist at New Century Advisors who developed the 'Sahm Rule' to gauge economic recessions, stated on the 7th (local time) that "there is no need for the U.S. Federal Reserve (Fed) to make an emergency interest rate cut."

In an interview with CNBC on the same day, Sahm said, "I do not see any factors that would necessitate an emergency rate cut."

Following the release of the July employment report, concerns about a recession have grown, leading some on Wall Street to call for the Fed to hold an emergency meeting before the September Federal Open Market Committee (FOMC) regular meeting to lower interest rates. However, Sahm, who created the Sahm Rule, drew a clear line, stating that the economy is not yet in a recession phase.

Nonetheless, she acknowledged that the risk of a recession is increasing and said there are sufficient reasons for a 'big cut' of 0.5 percentage points in the September rate decision.

Sahm said, "The best case is to start easing gradually in advance," adding, "What I have been talking about is risk, and I feel very strongly that there is a risk."

The Sahm Rule, an indicator used to gauge economic risk, determines that the economy has entered the early stage of a recession if the 3-month moving average of the unemployment rate is 0.5 percentage points higher than the lowest unemployment rate in the previous 12 months. Last month, the unemployment rate was found to be 0.53 percentage points higher than the lowest point in the past year, which has fueled recession fears in the market.

However, Sahm previously emphasized that the Sahm Rule is an empirical regularity derived from historical data, not a natural law.