On December 25, Morgan Stanley strategists pointed out that the U.S. economy may experience a "jobless productivity boom," which would curb inflation and open the door for further interest rate cuts by the Federal Reserve.
Data from the U.S. Department of Labor shows that hourly output from all non-farm workers increased by 3.3% year-over-year in the second quarter, a significant improvement from the 1.8% year-over-year decline in the previous quarter. Investors' expectations for the pace of interest rate cuts by the Federal Reserve next year are more aggressive than official forecasts.
According to the CME Group's FedWatch Tool, Federal Reserve officials expect only one rate cut in 2026, but investors believe there is a 72% probability of a rate cut by the end of the year. (Jinshi)
