$BTC $ETH $BNB 12 Will there be another big rate cut in December? BlackRock: The labor market is cooling, and the Federal Reserve may continue to "loosen" in December as a bull market arrives.
BlackRock's latest insights indicate that as the U.S. labor market shows significant cooling, the Federal Reserve may continue to cut interest rates in December.
Due to the prolonged government shutdown in the U.S. causing delays in economic data, the Federal Reserve's ability to assess the economic situation has become more challenging. BlackRock believes that the Federal Reserve is adopting a "risk management" approach to interest rate cuts, with the persistently weak job market becoming a key factor in its decision-making.
Data shows that the U.S. labor market has fallen into a state of "no hiring, no layoffs." Employment growth has continued to slow since the beginning of the year, with both labor supply and demand weakening—where the contraction in supply is mainly due to a significant decrease in immigration. This also explains why wage growth remains robust and the unemployment rate is still at historically low levels.
Although inflation remains above the 2% target, the Federal Reserve has made its interest rate cut path clear. The market widely expects a 25 basis point cut next week. BlackRock believes that the stagnant state of the job market also creates conditions for further rate cuts in 2026.
It is worth noting that employment data for October and November has been delayed until December 16 due to the government shutdown, which may include disruptive factors, such as a potential sharp drop in employment numbers in October due to government delays in layoffs. However, this data will only be released after the Federal Reserve's December meeting, thus having little impact on this decision.
BlackRock warns that if inflation accelerates again next year due to economic recovery or a rebound in hiring, the policy game may repeat itself, further pushing up long-term Treasury yields. Based on this, BlackRock has upgraded its rating of long-term U.S. Treasuries to neutral but advises investors to remain flexible in response.
