Morgan Stanley: The US "Jobless Productivity Boom" will prompt the Federal Reserve to further cut interest rates

December 25, Morgan Stanley strategists pointed out that the U.S. economy may experience “jobless productivity prosperity,” which will suppress inflation and open the door for more rate cuts by the Federal Reserve. Data from the U.S. Department of Labor show that in the second quarter, all non-farm business workers’ hourly output increased by 3.3% year-over-year, a significant improvement from the 1.8% YoY decline in the previous quarter. Investors’ expectations for the Fed’s rate cut pace next year are more aggressive than official forecasts. According to the CME FedWatch Tool, Federal Reserve officials expect only one rate cut in 2026, but investors believe there is a 72% chance of rate decreases by the end of the year. (Jin10)