Goldman Sachs Forecasts Three Fed Rate Cuts Starting September 2025

Goldman Sachs has updated its forecast on U.S. monetary policy, now expecting the Federal Reserve to deliver three consecutive 25-basis-point rate cuts starting in September 2025 [5]. This shift comes amid a series of weak economic readings and growing market anticipation for policy easing. The bank's projection aligns with rising market pricing, particularly in federal funds futures and the CME Group’s FedWatch tool, which now show an 85% probability of a September rate cut [1][2]. This represents a sharp increase from earlier in July, when the likelihood was only 43% [3].

The recent softness in labor market data has fueled these expectations. The latest jobs report not only fell short of forecasts but also included downward revisions to previous months, raising questions about the reliability of the data [6]. In response, Goldman Sachs has become more aggressive in its expectations, now projecting a three-cut easing cycle, diverging from earlier forecasts by institutions like Macquarie Group [9].

Market reactions have already reflected the anticipated shift in Fed policy. U.S. stock futures surged following the release of the disappointing employment data, with the Dow Jones Industrial Average jumping over 585 points [2]. Similarly, the two-year Treasury yield dropped, indicating investor anticipation of lower borrowing costs [5]. These moves highlight the strong influence of Fed policy expectations on asset prices.

The potential for a rate-cutting cycle could have broader market implications. Some analysts suggest that Fed easing could drive a new equity rally, but others warn of increased volatility due to uncertainty surrounding the accuracy of economic data. The recent political decision by U.S. President Donald Trump to remove the head of the Bureau of Labor Statistics has further intensified concerns about the politicization of key indicators [6].

With the September meeting now widely seen as a near-certainty for a rate cut, the Fed’s upcoming decisions will be closely monitored. If Goldman Sachs and other market observers are correct, the U.S. monetary policy cycle could be entering a new phase of easing. This could have significant consequences for global markets, reshaping investment strategies and asset valuations in the months ahead [1][5].

Sources:

[1]title1.............................(https://www.reuters.com/business/brokerages-retain-september-rate-cut-bets-after-soft-jobs-report-2025-03-20/)

[2]title2.............................(https://www.kiplinger.com/investing/stocks/dow-rises-585-points-on-rate-cut-hope-stock-market-today)

[3]title3.............................(https://www.economies.com/commodities/oil-news/oil-declines-as-opec+-goes-ahead-with-september-production-hike-47020)

[5]title5.............................(https://www.moomoo.com/news/post/56353592/tom-lee-says-fed-s-about-to-pivot-as-goldman)

[6]title6.............................(https://www.chinadailyasia.com/article/617260)

[9]title9.............................(https://m.fastbull.com/news-detail/us-jobs-data-shock-raises-concerns-new-market-4338090_0)