Analysis: Weak U.S. Employment Data May Prompt Fed to Cut Rates Earlier Next Year

BlockBeats News, December 17th, the Royal Bank of Canada pointed out that the non-farm payrolls data reflects a further weakening of the US labor market, while on the other hand, more resilient consumption indicates that demand conditions remain quite favorable. Overall, this may lead Fed policymakers who held divergent views at the last meeting to reassess their positions, increasing the possibility of a rate cut in 2026. That being said, Goolsbee and Schmidt, who were the two main dissenters last week in advocating to keep rates unchanged, will be stepping down from the voting positions next year, likely to be replaced by Hammack and Logan, who may be more hawkish.

Therefore, convincing them to change their minds and become more resolute in cutting rates will be a daunting task. However, the cooling of the labor market will continue to weaken their resolve, as the balanced scale of data evidence has undermined the Fed's rationale for maintaining rates unchanged. Therefore, the likelihood of the Fed easing monetary policy ahead of schedule in 2026 is increasing. (FXStreet)