Federal Reserve Policy Shift? Weakening Labor Market Increases Probability of Rate Cuts by 2026

Question

【BlockBeats】Recently, the US employment data was released, and the situation is worse than expected. An analysis from the Canadian Imperial Bank of Commerce pointed out that the non-farm employment data fully reflects the ongoing weakening of the US labor market, and this signal should not be ignored.

Interestingly, the consumption side has been relatively resilient. Demand remains quite steady, and this contrasting strength and weakness could cause the hawkish members of the Federal Reserve to reconsider—raising the probability of an early start to the rate cut cycle in 2026.

But there is a problem. Goolsbee and Schmied are the two main dissenters who insisted on holding rates last week. The good news is that they will leave the voting committee seats next year. The bad news is that their replacements, Hamaek and Logan, may have a more hawkish style, making them harder to persuade.

In other words, it won’t be easy to change these hawks’ minds and push them to actively promote rate cuts. However, the ongoing cooling of the labor market is hard to stop—the data is clear, and the Federal Reserve will find it difficult to continue defending holding rates. This means that the room for early monetary policy easing in 2026 is expanding, and the likelihood of liquidity release is increasing.

AmateurDAOWatcher · Accepted Answer

The labor market is so weak that interest rate cuts are just a matter of time, and hawkish policies can't change the overall trend.

JustAnotherWallet · Answer

Whenever the labor market collapses, they want to cut interest rates. This trick has been played out, and the key still depends on when the consumption side can no longer hold up.

rekt_but_vibing · Answer

The labor market is so tight, does the Federal Reserve still want to appear hawkish? But after the change in personnel, they are even more hawkish, which is a bit unreasonable.

BlockchainArchaeologist · Answer

The labor market is so weak, and you still expect the hawkish to willingly cut interest rates? Dream on.

BlockchainBrokenPromise · Answer

It seems that a rate cut is becoming more and more likely, but these new hawks are really hard to please.