Goldman Sachs pushes its Fed rate-cut outlook to June and December 2027

Goldman Sachs has revised its outlook for U.S. interest-rate cuts, pushing the bank’s forecast for the next two reductions in the Federal Reserve’s policy rate to June and December 2027. In a change attributed to Goldman’s economists, the firm said it now expects the Fed to keep rates unchanged through 2026, citing stronger economic activity and job growth after a robust payrolls report.

Under the update, Goldman no longer expects cuts to begin in late 2026. Instead, it forecasts that the Fed’s next two rate cuts will come in June and December 2027, after Goldman previously penciled in a different timing for the final part of its rate-cut path. Reuters reported that Goldman had previously forecast 25-basis-point cuts for December 2026 and March 2027.

Goldman’s assessment ties the shift largely to the labor market’s resilience. Reuters said the change followed a stronger-than-expected jobs report that suggested renewed labor market strength and gave the Fed “more room” to keep rates steady despite ongoing inflationary pressures linked to geopolitical and energy-related developments.

The note also emphasized how the stronger starting point for the economy affects the risk calculus for rate hikes. Goldman said the “resilient activity and employment data” lower the bar for a rate hike, not because they indicate an overheating risk, but because a more solid baseline reduces the chance that a hike would prove to be a costly mistake. The firm added that while rate hikes remain unlikely, they are “slightly more plausible” than it had previously suggested.

Beyond jobs data, Goldman’s forward-looking framework pointed to what it sees as the conditions that still need to be satisfied before cuts become the most natural policy path. Reuters said Goldman expects the Fed to delay further cuts until the effects of tariffs, higher oil prices tied to the Iran conflict, and other war-related pressures fade, and until year-over-year core PCE inflation moves closer to the Fed’s 2% target.

Goldman also referenced what it sees as overstated AI-driven demand easing. The bank’s view, as reported by Reuters, was that cooling in that demand would help bring inflation closer to target, reducing the urgency for additional Fed easing. In parallel, Reuters reported traders are pricing meaningful odds of rate hikes by the end of the year, citing CME FedWatch probabilities.

For markets, the practical significance is less about Goldman’s own forecast being “right” than about how quickly major banks adjust their policy assumptions when new data lands. A delayed-cut timeline can influence longer-dated bond yields, curve pricing, and risk management decisions across fixed income, especially for investors and trading desks that hedge based on expected Fed moves.