BlackRock Forecasts Limited Fed Rate Cuts in 2026 Amidst Stable Labor Market

BlackRock Strategists Predict Restrained Rate Cuts

Key Insights

• BlackRock strategists foresee minimal Federal Reserve rate cuts in 2026 unless the labor market undergoes severe deterioration.
• The current labor market shows signs of cooling without significant breakdown, suggesting limited rate easing next year.

According to BlackRock senior strategists Amanda Lynam and Dominique Bly, the Federal Reserve is likely to implement limited rate cuts in 2026 unless the labor market experiences a sharp decline. Their outlook is influenced by recent U.S. labor data indicating modest softening but no significant downturn. Despite a rise in the unemployment rate to 4.6% in November, primarily due to increased labor force participation and government job losses, analysts emphasize that this does not signify a fundamental weakening in labor conditions. From a policy perspective, the Fed perceives labor risks as balanced. While recent data highlight some downside risks noted by Chair Jerome Powell, they do not suggest a major employment breakdown. Having already enacted 175 basis points of cuts since September 2024, with policy rates nearing neutral, BlackRock anticipates limited scope for aggressive easing in 2026. Further reductions hinge on a pronounced labor market decline, which strategists do not foresee.