Seoul, South Korea - File Photo: Dealing room at Hana Bank headquarters in Jung-gu, Seoul

Meritz Securities predicted on the 25th that the U.S. might cut interest rates next month and potentially again in December, depending on whether an economic downturn or weakening labor demand materializes.

In a related report released today, Lee Seung-hoon, a researcher at Meritz Securities, made this prediction based on the speech given by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), at the Jackson Hole Economic Policy Symposium over the weekend.

He stated, "Chairman Powell's speech emphasized the downside risks in the labor market and the 'one-off' nature of tariffs' impact on inflation," adding, "This suggests a potential policy shift from a rate freeze to a rate cut."

Specifically regarding the labor market, he noted, "Chairman Powell mentioned the current labor market equilibrium as an unusual phenomenon where both demand and supply are decreasing, carrying significant downside risks. He also warned of a risk of a sharp rise in unemployment if these downside risks materialize."

However, Chairman Powell also indicated that he has "not completely dismissed concerns about inflation," stating, "The key will be whether the impact of tariffs on prices, which is now becoming clearly evident, escalates into a persistent inflation problem."

Consequently, he assessed, "The U.S. Fed is currently more concerned about welfare reduction than shocks to labor supply, and it views the possibility of inflation temporarily rising and then falling as more likely than a risk of persistent inflation."

He further commented, "The possibility of a Fed rate cut in September has increased, and there is a chance for an additional cut in the fourth quarter, depending on whether the economic downturn continues and labor demand weakens."

He added, "Given the high uncertainty and the coexistence of risks of economic downturn and price increases, it is relatively more likely that an additional cut will occur in December, after more data points have accumulated, rather than consecutive rate cuts following a September reduction."