Doha: Qatar National Bank (QNB) anticipates a more cautious approach from the US Federal Reserve regarding rate cuts, suggesting a slower decline than market expectations. The Fed is expected to cut its policy rate by 25 basis points twice more this year and once again in 2026, bringing the rate down to 3.5%. According to Qatar News Agency, QNB's weekly economic commentary indicates that the US economy is heading toward a soft deceleration. The bank projects real GDP growth of 1.7% for 2026, supported by a resilient labor market, a still-expanding services sector, and a moderate contraction in manufacturing. These factors offer a stable outlook despite the shifting policy rate expectations in recent months. The report highlights that a fragile market consensus is evident over the timing and size of the Fed's easing strategy for the coming year. Since the rate was held steady at the end of 2024, a softening labor market has shifted risk perceptions. Trade and fiscal policy volatility have driven uncertainty to record highs, prompting the Fed to adopt a cautious 'wait-and-see' approach. In September, the benchmark rate was reduced by 25 basis points to 4.25%. The Fed faces a challenging situation, balancing upward inflation risks with employment concerns. Inflation hovers around 2.9%, above the 2% target, while employment risks lean downward. This conflict complicates the Fed's dual mandate of maintaining low inflation and maximum employment. QNB further explains that labor markets are weakening gradually, aligning with a controlled economic soft landing. Employment trends guide policy rate directions, with no alarming signs of economic deterioration necessitating rapid rate cuts. The unemployment rate in August was 4.3%, consistent with balanced employment, and is expected to be 4.4% by the end of 2026. Additionally, leading indicators for the services sector suggest modest expansion. The Purchasing Managers Index (PMI) has remained mostly above 50, indicating stable business conditions. As services account f or over 75% of US output, this stability reduces the likelihood of a sharp economic slowdown. The manufacturing sector, although more sensitive to shocks and representing 11% of GDP, shows resilience despite contractions. The sector faces supply chain disruptions and tariff uncertainties but remains close to the 50-point mark in the PMI. This indicates that manufacturing is not signaling a major economic downturn.