Goldman Sachs Predicts Triple Fed Rate Cuts by 2025 Amid Disinflation Trends
1min read Goldman Sachs Chief Economist Jan Hatzius remains firm in his prediction of three interest rate cuts by the Federal Reserve in 2025, emphasizing underlying factors that continue to support a disinflationary trend. He highlighted ongoing economic adjustments, particularly within the labor market and wage growth, as pivotal elements in reducing inflationary pressures.
Despite forecasts of potential temporary spikes in inflation due to tariffs, Hatzius expects these impacts to be countered by fundamental disinflationary forces. He believes that while some inflation components, such as auto insurance, may initially appear backward-looking, their influence will diminish over time, leading to a slower rise in prices year-over-year, especially into early 2025.
Hatzius envisions the core Personal Consumption Expenditures (PCE) inflation rate easing from the current 2.8% to 2.4% by the end of 2025. This revised forecast reflects a modest upward adjustment due to expected tariff impacts, yet it remains consistent with a broader economic stability that supports the disinflation trend.
Labor market adjustments are seen as a key factor, as slowing wage growth helps alleviate inflation pressures. Hatzius also anticipates a "January effect" that could further reduce inflation comparisons by making December-to-January price hikes less pronounced than in previous years. This could lower year-over-year inflation rates, thereby enhancing the overall inflation outlook.
His confidence remains strong despite fluctuations in recent inflation data, underscored by improvements in underlying inflation drivers and stable labor market conditions. Such factors point to a likely moderation in inflation, particularly significant as 2025 approaches.
