Mizuho Bank: The Fed Has Been Realistically "Face-Slapped," Easing Cycle Set to Begin
BlockBeats News, September 6th. Mizuho Bank stated that the U.S. August non-farm payroll report further confirmed the weakening trend in the labor market, with the growth in employment, working hours, and income falling back to the levels of the pandemic period. Regardless of inflation, the Federal Reserve is almost certain to cut interest rates at the September meeting. A 25 basis point rate cut is almost a sure thing, but if August inflation is weaker than expected, a 50 basis point cut is more likely. The Fed's previous inflation forecasts have been "slapped in the face" by reality, while its 2026 unemployment rate forecast faces the risk of not being realized. They were overly pessimistic about inflation before, and overly optimistic about the labor market. It is expected that the Fed will launch a round of sustained easing cycle, aiming to lower interest rates to its perceived "neutral level" by March 2026, to around 3%. The new Fed chair is likely to further step up stimulus measures, lowering interest rates to near 2%. However, the risk is that if inflation picks up again, at least some of the stimulus measures will be withdrawn by 2027. (FX678)
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