Key facts
- Goldman Sachs economists have revised their forecast, now expecting the Federal Reserve to begin cutting interest rates in 2027.
- The firm previously anticipated rate cuts in late 2026 and early 2027.
Goldman Sachs now expects the Federal Reserve to hold interest rates through 2026, pushing anticipated rate cuts to 2027. This revision is driven by robust U.S. economic activity, strong job growth, and persistent inflation.
This shift in forecast from a major investment bank suggests a prolonged period of higher borrowing costs for consumers and businesses, potentially impacting investment strategies and economic growth.
Goldman Sachs economists have pushed back their forecast for Federal Reserve interest rate cuts to 2027, citing resilient economic activity and job growth following a strong U.S. payrolls report. The firm now anticipates rate reductions in June and December of 2027, a shift from its prior expectation of 25-basis-point cuts in December 2026 and March 2027.
This recalibration aligns Goldman Sachs with other institutions, such as Nomura, which also predict a prolonged pause in rate adjustments. The investment bank noted that the strong economic data reduces the risk of a rate hike appearing as a "costly mistake," although it acknowledged that hikes remain slightly more plausible than before.
Goldman Sachs indicated that the most probable scenario involves delaying rate cuts until inflationary pressures from tariffs, higher oil prices due to conflict, and other war-related factors diminish. Additionally, they expect core PCE inflation to move closer to the Federal Reserve's 2% target and for AI-driven demand to cool.
Market traders currently assign a 75.5% probability to the central bank implementing rate hikes by the end of the year, according to CME FedWatch data.
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