Goldman Sachs Predicts 50% Chance of September Rate Cut

Goldman Sachs, a leading financial institution, has revised its forecast, now anticipating that the Federal Reserve will cut interest rates in September. This prediction is based on the diminishing impact of tariffs and the slowing pace of inflation. The chief U.S. economist at Goldman Sachs, David Mericle, estimates that the likelihood of a September rate cut is slightly above 50%. This forecast includes a 25 basis point cut in September, with additional cuts penciled in for October and December 2025.

This shift in Goldman Sachs' outlook reflects some early signs that inflation related to tariffs has been milder than expected, while anti-inflation forces—including slowing wage growth and weakening demand—are forming. The bank has also lowered its terminal rate expectations from 3.5%-3.75% to 3%-3.25%.

The expectation of a rate cut in September is seen as a potential stimulus for economic growth and market stability. According to analysts, the Federal Reserve's decision to cut rates could be influenced by various economic indicators, including the slowing inflation rate and the reduced impact of tariffs on the economy. The analysts at Goldman Sachs have also revised their outlook for the two and 10-year Treasury yields, expecting them to end 2025 at 3.45% and 4.20%, respectively, down from their initial projections of 3.85% and 4.50%.

The forecast of a rate cut in September aligns with Goldman Sachs' broader revision of its 2025 outlook, which now includes three rate cuts starting in September. This adjustment reflects the institution's assessment of current economic conditions and the potential need for monetary policy adjustments to support growth. The anticipated rate cuts are expected to provide a boost to the economy by lowering borrowing costs and encouraging investment.

The expectation of a rate cut in September is part of a broader trend of economic analysis that suggests the Federal Reserve may need to take action to support economic growth. The slowing inflation rate and the reduced impact of tariffs are seen as key factors that could influence the Federal Reserve's decision-making process. The anticipated rate cuts are expected to provide a boost to the economy by lowering borrowing costs and encouraging investment, which could in turn support economic growth and market stability.