Goldman Sachs Predicts 3 Rate Cuts by Fed This Year

Goldman Sachs has revised its expectations for the Federal Reserve's interest rate cuts, now predicting that the central bank will reduce rates in September, earlier than previously anticipated. The investment bank had initially forecasted that the Fed would lower rates only once by the end of the year, but has since adjusted its prediction to include rate cuts in September, October, and December. This shift in outlook comes as economic indicators suggest that the need for monetary easing has become more pressing. The bank's economists believe that there is more room for rate cuts than previously thought, which could support lower yields.

The chief U.S. economist at Goldman Sachs has stated that the likelihood of a rate cut in September is slightly above 50%. This revision in the forecast is based on the assessment that the impact of tariffs may be smaller than expected and that deflationary effects are stronger than anticipated. The bank's economists also noted that tariffs would have a one-time impact on prices, further influencing their decision to adjust the forecast.

Looking ahead, Goldman Sachs does not expect a rate cut at the July FOMC meeting. However, the bank anticipates that the Fed will reduce rates by 25 basis points in September, October, and December of this year, as well as in March and June of 2026. This revised outlook reflects a growing consensus among market participants that the Fed will need to act more aggressively to stimulate the economy amid signs of slowing growth and inflationary pressures. The adjustment in the forecast underscores the increasing uncertainty surrounding the economic outlook and the potential for further policy changes in the coming months.