The Fed may initiate a continuous rate cut cycle with an interest rate target of 3%.

[Coin World] Mizuho Bank stated that the U.S. August non-farm payroll report further confirms the weakening tone of the labor market, with employment, hours worked, and income growth rates having returned to levels seen during the pandemic. Regardless of inflation, the Fed is almost certain to cut interest rates at the September meeting. A 25 basis point cut seems almost guaranteed, but if August inflation is weaker than expected, a 50 basis point cut is more likely. The Fed's previous inflation predictions have been "slapped in the face" by reality, and its unemployment rate forecast for 2026 faces the risk of being unachievable. They were previously too pessimistic about inflation and too optimistic about the labor market. It is expected that the Fed will initiate a prolonged easing cycle, aiming to reduce interest rates to what it considers a "neutral level," which is around 3% before March 2026. The new Fed chair is likely to further ramp up stimulus measures, bringing interest rates close to 2%. However, the risk is that if inflation resurges, at least some of the stimulus measures will be withdrawn by 2027.