Goldman Sachs Predicts 75 Basis Points Rate Cuts by Fed in 2025

Goldman Sachs has forecasted that the Federal Reserve will initiate interest rate cuts starting in September 2025. This projection is based on the ongoing softening of inflation trends, which suggests a potential shift in monetary policy. According to Goldman Sachs, three quarter-point cuts are expected before the end of the year, which would adjust the terminal rate to a range of 3.00% to 3.25%.

This anticipated rate cut holds significant implications for the market, potentially influencing asset prices and market strategies. The immediate effects include increased speculative activity, as investors may seek higher-yield opportunities in risk assets like cryptocurrencies. The anticipation of lower rates fuels interest in Bitcoin (BTC), Ethereum (ETH), and other altcoins, possibly boosting market momentum throughout 2025.

Jan Hatzius, Chief Economist at Goldman Sachs, stated, "Goldman Sachs now expects the Fed to begin rate cuts in September 2025, projecting three quarter-point cuts across the remainder of the year, which would set the terminal rate forecast at 3.00-3.25%."

Market reactions remain mixed, with major statements yet to be issued by the Federal Reserve or other influential figures. However, historical precedents indicate that rate reductions often inspire optimism. Sentiment, while cautious, reflects a potential rise in digital asset valuations. The 2019 and early 2020 Fed rate cuts sparked significant rallies in both traditional and cryptocurrency markets, setting a precedent for potential reactions to the expected cuts in September 2025.

Goldman Sachs has revised its forecast for the Federal Reserve's monetary policy, projecting three rate cuts in 2025. The first of these cuts is anticipated to occur in September, with subsequent reductions of 25 basis points each. This adjustment comes amidst various economic pressures and signals a shift in the financial institution's outlook on interest rates. The Fed has maintained steady interest rates since December 2024, when it last reduced its target range by a quarter of a percentage point. This move was made in response to what was perceived as a stabilizing economic environment at the time.

The revised forecast by Goldman Sachs aligns with the current economic climate, which includes concerns over stagflation and potential trade disruptions. The central bank's decision to hold rates steady has been influenced by a range of factors, including global trade tensions and domestic economic indicators. The anticipation of rate cuts in 2025 reflects a cautious approach by the Fed, aiming to balance economic growth with inflation control.

Goldman Sachs' projection of three rate cuts in 2025 is significant as it indicates a potential shift in monetary policy. The first cut in September is expected to be followed by additional reductions, each of 25 basis points. This forecast suggests that the Fed is prepared to adjust its policies in response to evolving economic conditions, particularly if inflation remains a concern or if there are signs of economic slowdown. The timing of these cuts is crucial, as they could influence various sectors of the economy, including housing, consumer spending, and business investment.

The revised forecast by Goldman Sachs also comes at a time when there is heightened focus on the Fed's minutes and its stance on inflation. The central bank's decisions are closely watched by market participants, who are looking for signals on future policy directions. The anticipation of rate cuts in 2025 could provide some relief to borrowers and stimulate economic activity, but it also raises questions about the Fed's ability to manage inflation effectively.

In summary, Goldman Sachs' projection of three rate cuts in 2025, starting in September, reflects a cautious and responsive approach to monetary policy. The Fed's decision to hold rates steady since December 2024 has been influenced by a range of economic factors, and the anticipated cuts in 2025 are aimed at balancing growth and inflation control. The timing and magnitude of these cuts will be closely monitored by market participants, who are looking for signals on the Fed's future policy directions.