According to a Guotai Haitong Securities Co., Ltd. research report, the U.S. job market in December continued its trend of low hiring and low layoffs. On one hand, the unemployment rate unexpectedly fell back to 4.4%, interrupting its previous sustained upward momentum; on the other hand, new job growth continued its slowing trend, and subsequent annual revisions might lead to further downward adjustments.
Since the December unemployment rate did not climb further and numerous employment indicators suggest the risk of the U.S. labor market stalling remains low, the Federal Reserve may still have room to pause interest rate cuts, having already implemented three consecutive reductions. Based on CME data, following the release of the non-farm payrolls report, market expectations for a rate cut in January are only 5%.
The market still anticipates the Federal Reserve will implement two rate cuts in 2026, but the timing has been pushed back to June and September 2026. Potential catalysts for a subsequent increase in rate cut expectations may primarily revolve around the appointment and policy stance of the new Federal Reserve Chair.
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