The U.S. fiscal cycle may be difficult to close, Japan's low interest rate mentality remains, and the Federal Reserve's "balance" may once again tilt towards curbing inflation---1211 Macro Dehydration
The U.S. fiscal cycle faces challenges, as Trump's tax cuts may lead to rising deficits, affecting national savings and interest rates. The deflationary mindset in the Japanese economy is weakening, and policy rates are expected to be raised to neutral levels. The Federal Reserve's monetary policy focus has shifted from inflation to employment, but inflation may again become a focal point next year
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Trump's policy starting point is tax cuts to stimulate the economy, but tax cuts financed by deficits or increased government debt reduce national savings, raise interest rates, and crowd out private investment. Considering the effects of tariffs and spending cuts, the U.S. deficit may still rise, challenging the logic of fiscal cycles.
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The deflationary mindset in the Japanese economy has clearly weakened. Inflation is stabilizing above 2%, and wage growth is accelerating, reflecting higher inflation. It is expected that Japan's policy interest rate will be raised to a neutral level.
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The "balance" of the Federal Reserve may once again tilt towards "inflation." Under the Federal Reserve's dual mandate of "inflation + employment," inflation has steadily cooled since the second quarter of this year, shifting the focus of monetary policy from inflation to employment; however, we may be at a turning point in the Federal Reserve's "balance": inflation may again become the focus of monetary policy next year