Goldman Sachs delays its Fed rate-cut timeline after a stronger-than-expected jobs picture

Goldman Sachs delivered an unwelcome message to markets that have been waiting for Federal Reserve rate cuts: the bank is moving its timing for the first reduction further out. In a revised view attributed to Goldman’s chief US economist David Mericle, the firm has shelved its prior 2026 expectations for easier policy after a May jobs report that reportedly landed well above consensus forecasts.

According to reporting by Crypto Briefing, Goldman’s updated forecast now sees the first 25 basis point (0.25 percentage point) cut occurring in June 2027, followed by another 25 basis point cut in December 2027. That would total 50 basis points of easing over the period, but none in 2026 under the firm’s baseline timeline. Prior to the update, Goldman had penciled in cuts beginning in December 2026 and then again in March 2027, effectively wiping out the prospect of rate relief for the rest of this year.

The change was tied to the labor-market surprise. Crypto Briefing said Goldman’s revision was prompted by a May 2026 jobs report in which nonfarm payrolls came in at 172,000, around double the range of 80,000 to 89,000 expected by Wall Street at the time. The unemployment rate was reported to be unchanged at 4.3%, which the reporting framed as part of the reason Goldman judged that policy easing could be delayed.

Goldman also raised its probability of a more hawkish outcome. Crypto Briefing reported that Goldman doubled the estimated chance of rate hikes to 20%, from 10%, while leaving its “terminal rate” range at 3.0% to 3.25%. The terminal rate is the level of interest rates policymakers would reach at the top of the cycle, before any subsequent easing.

The firm’s readout arrives amid a broader market debate over how quickly the Fed can move once inflation and growth data start diverging. While Goldman did not, in the available reporting, dispute the central idea that rates will eventually fall, the updated timetable suggests the bank sees less urgency for the Fed to cut soon. That shift matters for everything from bond yields to credit conditions, because expectations for the first move often drive the path of longer-term rates.

For Goldman specifically, a delayed cut cycle can influence the economics of multiple parts of its business. In plain terms, higher-for-longer rate expectations can support trading and hedging activity when volatility rises, while also affecting deal financing, loan demand, and the pricing of risk across capital markets. Investment banking fees depend more on transaction volumes than on day-to-day rate moves, but the cost of capital is still a key input into merger and acquisition and capital markets issuance decisions.

Still, some details remain uncertain because the underlying primary post or memo from Goldman was not accessible in the material reviewed for this story. The original report on TheStreet could not be retrieved in full, and the specific language attributed to Goldman’s economist is therefore based on secondary coverage. As a result, the exact phrasing of Goldman’s “strong message” and how it characterizes the Fed’s reaction function were not independently verified here.

Next for markets is whether additional economic data reinforces the labor-market strength that triggered Goldman’s revision, or whether it fades enough to bring forward the easing timeline. Investors will likely watch incoming inflation and jobs reports for confirmation that the Fed can afford to cut, since Goldman’s baseline now effectively requires that policy to stay restrictive through at least the end of this year, under its reported scenario. If the labor market cools more than expected, Goldman’s outlook could shift again, but for now the bank is indicating that relief is farther away than it previously forecast.