Goldman Sachs says it is increasingly likely that the Federal Reserve will keep interest rates unchanged for the rest of the year as economic conditions remain stronger than previously expected.
Goldman Sachs Research has downgraded its forecast for the last two rate cuts of the current easing cycle. The bank now expects the Fed to cut rates in June 2027 and December 2027, compared to its previous forecast of December 2026 and March 2027.
The revised outlook follows stronger-than-expected US economic data, including continued resilience in the labor market and consumer spending. Goldman says recent employment data has reduced the likelihood that policymakers will feel pressure to cut rates in the near term.
The company expects the unemployment rate to increase only modestly from current levels, reaching about 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.
Inflation also remains a key factor in the bank’s prospects. Goldman expects core inflation to remain above 3% through 2026, before gradually moving closer to the Fed’s long-term target of 2% in 2027.
The report notes that several factors continue to support inflationary pressures, including tariffs, higher energy prices, ongoing geopolitical tensions in the Middle East and continued investment in artificial intelligence infrastructure.
As a result, Goldman believes the Federal Open Market Committee (FOMC) will remain cautious about cutting rates until inflation shows more sustainable progress toward its target.
According to the company’s updated forecast, the federal funds rate would eventually fall to a range of 3.0% to 3.25% after expected rate cuts in 2027.
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