According to BlockBeats, BCA Research analyst Dhaval Joshi has identified a significant discrepancy between the current pricing of U.S. interest rates and the Federal Reserve’s stated position, suggesting a potential mispricing in the market. This concern has been amplified following U.S. President Donald Trump’s call for a 3 percent rate cut, particularly in the wake of July’s employment report that indicated a notable slowdown in the American labor market. However, Joshi emphasizes that the underlying causes of this slowdown warrant closer examination.
Joshi argues that the recent weakness in the labor market is not primarily driven by a decline in labor demand, but rather by a reduction in labor supply. He cautions that lowering interest rates could exacerbate the existing imbalance between labor demand and supply, potentially fueling inflation without generating additional employment opportunities—an outcome that would constitute a policy misstep.
He further stresses the importance of distinguishing between preliminary and revised economic data. Initial releases often rely on incomplete information to meet reporting deadlines, which can affect their accuracy. In contrast, revised data, compiled with more comprehensive and complete information, tend to provide a clearer picture. Analyzing the revised U.S. employment figures reveals a consistent trend: employment growth has mainly resulted from an increase in labor supply. The recent employment decline is attributable to a slowdown in the growth rate of labor supply rather than a reduction in labor utilization, such as rising unemployment. This nuanced understanding highlights a significant mispricing of U.S. interest rates within the market.
Source: binance
