Goldman Sachs pushes Fed rate cut forecast to December 2026
At a Glance
The desk interprets Goldman Sachs' revised forecast for the Federal Reserve's rate cuts, now projected for December 2026, as a significant indicator of sustained inflationary pressures and a robust labor market. Per the full note source, Goldman cites persistent inflation near 3%, driven by rising energy costs, as a key factor in delaying rate cuts. This shift suggests a more cautious approach from the Fed, which could keep upward pressure on Treasury yields and impact rate-sensitive sectors. The desk highlights that Goldman's terminal rate forecast remains unchanged at 3% to 3.25%, indicating a shallower easing path than previously anticipated by the market.
Key Takeaways
- 01Goldman Sachs now expects first Fed cut in December 2026 vs prior September 2026.
- 02Terminal rate unchanged at 3-3.25% implies shallower easing than markets priced.
- 03Core PCE inflation held at 3.2% YoY; energy costs add upward pressure.
Full Analysis
What the desk is arguing
Goldman Sachs has delayed its forecast for the next Federal Reserve rate cut to December 2026, pushing back from September 2026, after two consecutive strong US jobs reports reinforced the case for the Fed to keep policy on hold. The revision centers on inflation running well above the Fed's 2% target, with PCE inflation expected to hover near 3% through 2026, driven partly by energy costs that have surged 35-45% since the escalation of the Iran conflict.
The bank argues that energy price pass-through into broader price measures has not yet given the Fed sufficient grounds to ease, with March headline PCE at 3.5% YoY and core PCE at 3.2% YoY. Personal spending rose 0.9% in March, pointing to persistent consumer demand that keeps the labor market resilient, further delaying the start of the easing cycle.
By moving the cut forecast to December 2026, Goldman implicitly rejects the market's expectation of a faster and deeper easing cycle, instead projecting a slower and shallower path with the terminal rate unchanged at 3%-3.25%.
Market Implications
The delay in Fed rate cut expectations is a tailwind for the US dollar, especially against low-yielding currencies. For EUR/USD, higher-for-longer US rates support the dollar, capping the pair's upside. Tighter US monetary policy versus the ECB's nearing inflection point may keep EUR/USD below 1.10 near term. Emerging market currencies face additional headwinds as US yield advantage persists.
From the original
Goldman Sachs has pushed its Federal Reserve rate cut forecast back to December 2026, citing sticky inflation near 3% and a resilient jobs market, with its terminal rate view held at 3% to 3.25%. Summary: Goldman Sachs shifted its forecast for the next Fed rate cut to December 20
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4 itemsGoldman Sachs drops call for December Fed rate cut
Goldman Sachs has revised its projections for Federal Reserve rate cuts, now anticipating no cuts until June 2027, as indicated in their recent analysis [source]. This shift is primarily influenced by a stronger-than-expected jobs report and persistently low unemployment figures, pointing towards a resilient labor market. The desk interprets this revision as a potential signal of more prolonged monetary policy stability than previously expected, which could keep the dollar stronger against its peers in the medium term. With the Fed currently in a blackout period ahead of next Wednesday's FOMC meeting, traders are cautious but vigilant for the implications of any signals from incoming Fed personnel like Kevin Warsh.