Dallas Fed President Kaplan supports a reduction in interest rates by half a point.

• On Tuesday, former Dallas Fed President Robert Kaplan stated on CNBC that opting for a bolder move of 50 basis points would better prepare policymakers for the latter part of the year.
• Currently, markets are predicting a 50% chance that the Federal Open Market Committee will approve a half-point reduction in interest rates, a change from previous predictions.

If Robert Kaplan were still involved, he would advocate for a 0.5% interest rate reduction at this week's Federal Reserve meeting.

The Dallas Fed president advised CNBC on Tuesday that a bolder move of 50 basis points would better prepare policymakers for the economic challenges ahead and the latter part of the year.

"Kaplan stated during a "Squawk Box" interview that if he were seated at the table, he would be advocating for 50 in the meeting. He believes the Fed may have been a meeting or so late, and if he had the opportunity to redo, he would prefer the cutting to have started in July rather than September."

The Federal Open Market Committee is expected to approve a 50 basis point reduction in interest rates, according to the CME Group's FedWatch, which is putting about 2 to 1 odds on this outcome. This is a change from the 25 basis point cut that had been priced in leading up to Friday. One basis point equals 0.01%.

The central bank's benchmark overnight lending rate, currently known as fed funds, ranges from 5.25% to 5.50%.

If the committee decides to take a more aggressive stance, Kaplan stated that it would be up to Chair Jerome Powell to reveal in his post-meeting press conference on Wednesday that additional cuts are "likely to be more measured." The Fed's two-day policy meeting begins on Tuesday.

""If the group is split, Jay Powell's personal disposition and ability to wrangle everyone to a unanimous decision will determine the outcome," Kaplan said."

Goldman Sachs appointed Kaplan as a managing director after he served as the head of the Dallas Fed from 2015 to 2021.