Goldman Predicts 3 Fed Rate Cuts in 2025 Starting September

Goldman Sachs has revised its outlook for Federal Reserve monetary policy, predicting that the central bank could begin cutting interest rates as early as September 2025. The investment firm, managing over $3 trillion in assets, attributes this shift to recent signs of slowing inflation and a cooling labor market. The forecast includes the possibility of three 25-basis-point rate cuts starting in the fall, signaling a more accommodative stance for monetary policy [1].

The rationale for this potential policy shift is rooted in recent economic data. Goldman Sachs highlighted significant downward revisions to employment figures in May and June, with a 258,000-job adjustment marking the largest such revision outside of recessions since 1968. These revisions span both public and private employment data, raising concerns about the strength of the labor market and supporting the case for a Fed pivot [3].

Market pricing has already begun to reflect these expectations. The probability of a September rate cut has surged to 92%, while futures markets indicate a roughly 90% chance of a 25-basis-point cut during the Federal Open Market Committee’s September meeting. The two-year Treasury yield dropped 22 basis points to 3.75% following the release of recent employment data, further underscoring investor anticipation for rate easing [3].

Goldman Sachs’ forecast aligns with the growing consensus among financial analysts that the Fed is nearing a policy shift. Tom Lee of Fundstrat, for instance, argues that recent job report revisions strengthen the case for a Fed pivot. He notes that a rate cut would likely support higher equity valuations by reducing discount rates and increasing risk appetite [3]. If the Fed moves as expected, it could trigger a broad market rally, particularly in risk assets like tech stocks and cryptocurrencies [1].

However, not all institutions share the same view. Some Wall Street analysts remain cautious, suggesting the Fed may hold off on rate cuts until 2026. This divergence highlights the uncertainty surrounding the central bank’s next move. The Fed has consistently emphasized its data-dependent approach and has not signaled an imminent policy shift, despite the growing market consensus [4].

Despite the uncertainty, the potential for rate cuts has already influenced investor behavior. Markets are pricing in two rate cuts by the end of 2025, with a 76% probability assigned to the September cut. If realized, this would mark a significant departure from the Fed’s current stance of rate stability and could usher in a more accommodative monetary environment [3].

The anticipated easing cycle could also have implications for asset allocation strategies. Goldman Sachs suggests that a Fed rate cut would likely drive capital toward riskier investments, increasing demand for alternative assets such as Bitcoin [5].

Sources:

[1] title: Goldman Sachs Predicts 3 Fed Rate Cuts in 2025 as Labor ...

url: https://web.ourcryptotalk.com/news/goldman-fed-rate-cuts-2025

[2] title: Fed Rate Cut Probability for September Soars to 92%

url: https://coinedition.com/fed-rate-cut-probability-september-crypto-market/

[3] title: Tom Lee Says Fed's About To Pivot As Goldman Warns Of ...

url: https://finance.yahoo.com/news/tom-lee-says-feds-pivot-003127974.html

[4] title: Economic Outlook: Fed could skip rate cuts in 2025, big ...

url: https://www.inc.com/phil-rosen/economic-outlook-fed-rate-cuts-labor-market-powell-trump-stock-market-investors/91222787

[5] title: Goldman Sachs Forecasts FOMC Rate Cuts Starting ...

url: https://phemex.com/news/article/goldman-sachs-predicts-fomc-to-implement-rate-cuts-starting-september_14368