The Fed won't 'push the panic button' and go for a jumbo rate cut, economist says

As investors await the upcoming rate decision by the U.S. Federal Reserve this month, Carl Weinberg of High Frequency Economics said that a deep interest rate cut was unlikely.

Policymakers at the U.S. central bank are widely expected to begin lowering interest rates as they meet on Sept. 17-18, marking a shift from the post-pandemic policy tightening that has raised fears of a U.S. recession.

"We're not seeing anything that I can imagine, in the data, that's going to trigger the Fed to do what I would call a panicked 50 basis point rate cut," Weinberg, chief economist at High Frequency Economics told CNBC "Squawk Box Asia," adding that the economy will welcome a 25 basis point cut instead.

He acknowledged that while there has been a slowdown in hiring, the most recent initial claims for unemployment data have gone down.

U.S. labor market data on Thursday offered mixed signals about the state of the economy amid concerns over the Fed having kept rated higher for longer than it was needed.

Private sector payrolls grew at their slowest pace since 2021, raising concerns about a sharp slowdown in the labor market. On the other hand, weekly unemployment benefit claims fell compared to the previous week.

"Here's what I think is going to take to get the Fed to move by 50 basis points, it's going to take a big uptick in initial claims for unemployment insurance, evidence of more layoffs occurring in the economy and a sharp drop off in hiring, perhaps down to zero," Weinberg said.

Real interest rates have gotten higher while inflation has gone down, he observed. "The Fed has to do something about that, but it doesn't have to push the panic button and go [for a] 50 [basis point cut]," Weinberg said.

The Fed's benchmark borrowing rate,