Goldman Sachs said the Fed is increasingly likely to keep interest rates unchanged through the rest of the year as economic conditions remain stronger than previously expected.
Goldman Sachs Research I paid Supporting his expectations for the last two interest rate cuts in the current easing cycle. The bank now expects the Fed to cut interest rates in June 2027 and December 2027, compared to its previous forecast of December 2026 and March 2027.
The revised forecast comes on the heels of stronger-than-expected economic data in the United States, including continued resilience in the labor market and consumer spending. Goldman says the latest employment numbers make it less likely that policymakers will feel pressure to cut interest rates in the near term.
The company expects the unemployment rate to rise only modestly from current levels, reaching about 4.4% by the end of the year. According to Goldman, this level is likely to remain too low to justify an accelerated easing cycle by the Fed.
Inflation also remains a key factor in the bank’s forecasts. Goldman expects core inflation to remain above 3% through 2026 before gradually approaching the Fed’s long-term target of 2% in 2027.
The report notes that several factors continue to support inflationary pressures, including tariffs, rising energy prices, ongoing geopolitical tensions in the Middle East, and continued investment related to artificial intelligence infrastructure.
As a result, Goldman believes the FOMC will remain cautious about cutting interest rates until inflation shows more sustained progress toward its target.
Under the company’s updated forecast, the federal funds rate will eventually fall to a range of 3.0% to 3.25% after expected rate cuts in 2027.
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