TLDR
- Goldman Sachs now expects the Federal Reserve to hold rates steady through all of 2026
- The bank moved its rate cut forecast to June and December 2027
- A stronger-than-expected jobs report drove the change in outlook
- Goldman sees core PCE inflation staying above 3% throughout 2026
- The bank puts the odds of a rate hike at 20%, up from 10%
Goldman Sachs has revised its Federal Reserve forecast, saying the central bank will not cut interest rates until 2027. The bank had previously expected cuts in late 2026 and early 2027.
Goldman Sachs Group Inc. economists no longer expect the Federal Reserve to cut interest rates this year due to a stronger-than-expected labor market. https://t.co/x5mIaqLB6N
— Bloomberg (@business) June 7, 2026
The change was driven by a strong U.S. jobs report that showed the labor market remains resilient. Goldman economist David Mericle said the data removes any urgency for the Fed to lower rates this year.
Why Goldman Changed Its Forecast
Goldman now expects rate cuts in June and December of 2027. That’s a shift from its earlier call of December 2026 and March 2027.
Mericle said the unemployment rate will likely rise only modestly to 4.4% this year, lower than his earlier estimate of 4.6%. He said that level is “not enough to create a sense of urgency to lower rates.”
The bank pointed to three main forces keeping inflation elevated: tariffs, higher oil prices tied to the Middle East conflict, and what it describes as overstated demand from artificial intelligence.
Goldman expects these pressures to keep year-over-year core PCE inflation above 3% for all of 2026. The bank believes inflation will fall closer to the Fed’s 2% target only in 2027.
Mericle noted that the underlying picture is softer than the headline numbers suggest. Wage growth is running about half a percentage point below the level linked to stable 2% inflation.
Leading indicators for rent growth also remain low, which Goldman sees as a sign that inflation could ease once the temporary factors fade.
Rate Hike Risk Rises Slightly
Despite the more cautious outlook on cuts, Goldman says rate hikes remain unlikely. However, the bank raised its probability of a hike to 20%, up from 10%.
Mericle said resilient growth and employment data reduce the risk that a hike would be seen as a policy mistake by the Fed.
Goldman left its terminal rate forecast unchanged at 3% to 3.25%. The bank said a long pause could lead Fed officials to conclude rates are already at the right level.
The bank added that its probability-weighted forecast “remains meaningfully more dovish than market pricing.”
Nomura also forecast last month that the Fed would stay on hold through 2026, suggesting Goldman is not alone in this view.
According to the CME FedWatch tool, traders currently assign a 75.5% probability to rate hikes by year-end, reflecting broader market concern about persistent inflation.
The Fed has not made any formal statement in response to the latest Goldman forecast.
