Goldman Sachs has revised its forecast for Federal Reserve interest rate cuts, now expecting the central bank to lower rates in June 2027 and December 2027, compared with its prior forecast of December 2026 and March 2027. The bank cited stronger-than-expected economic data in the US, including continued resilience in the labor market and consumer spending. Goldman Sachs Research stated that recent employment figures have reduced the likelihood that policymakers will feel pressure to cut rates in the near term, as the Federal Reserve navigates its current easing cycle amid persistent inflationary pressures.
Goldman Sachs Revises Federal Reserve Rate Cut Timeline
Goldman Sachs Research has pushed back its forecast for the final two interest rate cuts of the current easing cycle. The bank now expects the Fed to lower rates in June 2027 and December 2027, compared with its prior forecast of December 2026 and March 2027. The revised outlook follows stronger-than-expected economic data in the US.
Economic Data Shows Labor Market and Consumer Spending Resilience
Goldman Sachs stated that recent employment figures have reduced the likelihood that policymakers will feel pressure to cut rates in the near term. The firm expects the unemployment rate to rise only modestly from current levels, reaching approximately 4.4% by the end of the year. According to Goldman, that level would likely remain too low to justify an accelerated easing cycle from the Federal Reserve. The bank noted continued resilience in the labor market and consumer spending as key factors supporting the revised forecast.
Core Inflation Expected to Stay Above 3% Through 2026
Inflation remains a key factor in Goldman Sachs' outlook. The bank expects core inflation to stay above 3% through 2026 before gradually moving closer to the Fed's long-term 2% target in 2027. The report notes that several factors continue to support inflationary pressures, including tariffs, elevated energy prices, ongoing geopolitical tensions in the Middle East and continued investment tied to artificial intelligence infrastructure. Goldman believes the Federal Open Market Committee (FOMC) will remain cautious about lowering rates until inflation shows more sustained progress toward its target.
Federal Funds Rate Projected to Reach 3.0%-3.25% Range
Under Goldman Sachs' updated forecast, the federal funds rate would eventually decline to a range of 3.0% to 3.25% following the anticipated rate cuts in 2027.
FAQ
What is Goldman Sachs' new forecast for Federal Reserve rate cuts?
Goldman Sachs now expects the Federal Reserve to lower interest rates in June 2027 and December 2027, compared with its prior forecast of December 2026 and March 2027.
Why did Goldman Sachs delay its Federal Reserve rate cut forecast?
Goldman Sachs cited stronger-than-expected economic data in the US, including continued resilience in the labor market and consumer spending, as well as recent employment figures that reduced the likelihood of near-term rate cuts.
What does Goldman Sachs expect for inflation through 2026?
Goldman Sachs expects core inflation to stay above 3% through 2026 before gradually moving closer to the Federal Reserve's long-term 2% target in 2027, with inflationary pressures supported by tariffs, elevated energy prices, geopolitical tensions in the Middle East, and artificial intelligence infrastructure investment.
