Goldman Sachs no longer expects Fed rate cuts this year, after shifting its view again on the timing of easing by the US central bank.
Fed rate cuts pushed back again
The bank had already moved its call from September to December last month. Now it expects the first cut only in June next year. Goldman also said it is pushing its final two rate cuts in its Fed forecast back to June and December of 2027.
The bank said the labour market has been stronger than it expected. It now sees the unemployment rate rising only slightly further to 4.4%. That, it said, is not enough to create urgency for lower rates. Goldman added that the most natural path for the FOMC is to wait until the effects of tariffs, the war, and AI demand fade and core PCE inflation nears 2%.
Fed rate cuts outlook after strong jobs data
The shift follows a stronger-than-expected US non-farm payrolls report for May. The jobless rate also held at 4.3%. Markets reacted on Friday last week, although the move did not carry through into this week.
Goldman Sachs also said rate hikes remain unlikely, though it now sees them as somewhat more likely than before. It kept its terminal rate forecast at 3% to 3.25%. The bank said the FOMC’s longer-run dots have stayed stable over the past year, and most participants still expect further normalisation.
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