Federal Reserve Unlikely to Cut Interest Rates in December Amid Strong Job Growth

Recent U.S. employment data indicating stronger-than-expected job growth has led economists to anticipate that the Federal Reserve will maintain current interest rates during its December meeting, diverging from earlier expectations of a rate cut.

In September, non-farm payrolls increased by 119,000, significantly surpassing the forecast of 50,000. Despite the unemployment rate rising to 4.4%, the highest in four years, the broad-based payroll rebound suggests economic resilience.

Morgan Stanley has revised its forecast, no longer expecting a rate cut in December. The firm now projects reductions in January, April, and June 2026, which would bring the federal policy rate to between 3% and 3.25%.

San Francisco Federal Reserve President Mary Daly remains open-minded about a December rate cut but emphasized the need for more economic data before making a final decision. She noted that while inflation has not risen as much as expected, employment has weakened more than anticipated.

The Federal Reserve's upcoming meeting on December 9-10 will be closely watched as policymakers assess the latest economic indicators to determine the appropriate course for interest rates.