After the data release on December 25th, market expectations for the Federal Reserve's rate cuts in 2026 have noticeably cooled down. CME's observation data shows that the probability of rate cuts in January has rebounded compared to before, mainly due to economic growth exceeding expectations.

Interestingly, the leading candidate for Federal Reserve Chair, Hasset, then expressed his views. He believes that the main drivers of economic growth are still falling prices, income growth, and improved market sentiment. He also provided a specific judgment: if GDP growth can be maintained at around 4%, new employment is expected to recover to a level of 100,000 to 150,000 jobs per month. However, he also issued a stern warning, saying that the Federal Reserve has been slow to respond to rate cuts and is already behind the curve.

Looking deeper, the economic growth in the third quarter was mainly contributed by inventory digestion and improved trade environment, and the sustainability of these factors is questionable. The most critical issue is that employment has already started to weaken, and this trend has not changed. Against the backdrop of the gradually confirmed new Fed Chair candidate and a policy tilt towards employment, the market generally expects about three rate cuts in 2026.