Investing.com -- Former New York Federal Reserve President Bill Dudley on Wednesday called for the Fed to cut rates as soon as next week amid recession concerns, reversing his long-held view for the U.S. central bank to persist with its higher for longer rate regime.

"The facts have changed, so I’ve changed my mind. The Fed should cut, preferably at next week’s policy-making meeting," Dudley said in a Bloomberg op-ed piece ahead of the Fed's July 30-31 policy meeting.

For a long while, the strength in the U.S. economy suggested the Fed wasn't doing enough to slow growth as the stock market surged and financial conditions remained loose -- but those facts have now changed.

"Now, the Fed’s efforts to cool the economy are having a visible effect," Dudley said, flagging that lower income households are feeling the impact of higher rates on their credit cards and auto loans at time when the labor market is cooling.

The signs of slowing growth are appearing in the the labor market, Dudley adds, expressing concern about the three-month average unemployment rate rising 0.43% from its low point in the prior 12 months to a rate that could spark a recession.

This rate is now very close to "the 0.5% threshold that, as identified by the Sahm Rule, has invariably signaled a US recession," the former NY Fed president said.

Dudley concerns about the labor market aren't without merit as Fed chairman Jerome Powell also signaled recently that softening in the labor market now warranted a closer eye.

“Elevated inflation is not the only risk we face,” Powell said earlier this month in testimony before the Senate Banking Committee, noting that the "labor market has cooled really significantly across so many measures."

Inflation, meanwhile, continues to slow to the Fed's target. The Fed’s preferred consumer-price indicator, the core deflator for personal consumption expenditures, was up 2.6% in May from a year earlier, not "far above the central bank’s 2% objective," Dudley added.

Dudley acknowledges that the Fed may not want to cut rates too soon and bear the risk of inflation rising once again, while the Sahm Rule isn't something that holds sway at the Fed discussion table yet.

At its meeting next week, the voting Fed members are expected to vote in favor of keeping rates unchanged in a range of 5.25% to 5.5%.

About 95% of traders expect the Fed to keep interest rates steady at the July meeting, according to Investing.com's Fed Rate Monitor Tool.

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