The Federal Reserve should cut interest rates accordingly; the fiscal deficit dilemma behind the steady unemployment rate remains unresolved.

U.S. Treasury Department Economic Advisor Lavorgna recently pointed out that, against the backdrop of a healthy unemployment rate, the Federal Reserve should continue to advance the easing process. This statement reflects policymakers’ new assessment of the economic situation.

Balanced Unemployment Rate Lays the Foundation for Rate Cuts

According to the latest assessment, the U.S. unemployment rate shows a relatively balanced trend, neither overly tight nor in persistent deterioration. This stable employment market provides room for monetary policy adjustments. Lavorgna believes that, under the dual conditions of easing inflationary pressures and relatively stable employment, the Federal Reserve should accelerate the pace of rate cuts.

Fiscal Deficit as a Percentage Expected to Decline, Long-term Outlook Improves

Looking ahead to 2026, the U.S. fiscal deficit as a percentage of GDP is expected to show a downward trend. This means that although the scale of the deficit still exists, relative to the overall economy, fiscal conditions are improving. The decline in the deficit ratio will help alleviate concerns about long-term debt burdens and create more favorable conditions for sustainable economic growth.

The combination of rate cuts and fiscal deficit improvement may bring new development opportunities for the U.S. economy in 2026.