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TODAY’S JOBS DATA AND THIS WEEK’S CPI WILL DECIDE FED POLICY FOR 2026. This is not just another data update. This is about where the U.S. economy is heading next. Today, the U.S. unemployment rate will be released. The market expects 4.4%. This is the first major labor data after the government shutdown ended, so markets want to see how the economy looks now that activity has restarted. Why this matters is simple. The Federal Reserve has two main jobs: • Control inflation • Keep the labor market stable Right now, both are moving in the wrong direction. Let’s start with stagflation, because Powell has already warned about this risk. Stagflation means: • Inflation stays high • Jobs weaken and unemployment rises That is the Fed’s worst case scenario. Looking at the data: Inflation is still around 3%, well above the Fed’s 2% target. Unemployment has already moved up toward 4.4%, and is trending higher. This is why today’s number is so important. If unemployment comes above 4.4%, it clearly shows the labor market is weakening. That immediately puts pressure on the Fed. If unemployment jumps closer to 4.6–4.7%, markets will start talking about recession, not just stagflation. Now add the second key data point. On December 18, U.S. CPI inflation data will be released. The forecast is 3%. This CPI number, combined with jobs, will decide what the Fed does in January. Here are the four possible outcomes, in simple terms: If unemployment rises and inflation cools → The Fed is very likely to ease policy to support jobs. If unemployment rises sharply and inflation moves up slightly → The Fed may still ease policy, because job damage becomes the bigger problem. If inflation rises but unemployment stays stable → The Fed will likely maintain the current policy. If unemployment stays low and inflation is slightly lower but still above 2% → The Fed will maintain the current policy, because inflation is still not fixed. This is the balance the Fed is struggling with. High inflation means they should stay tight. Weak jobs mean they should ease. And that’s the real problem. Markets are not reacting to one number. They are reacting to how jobs and inflation move together. That’s why today’s jobs data and this week’s CPI are critical. They will decide: • Rate cuts or pause • Recession risk and stagnation risk • Liquidity direction in 2026 This is not just about today. This is about where policy goes next.