Greg had the breaking on this earlier:
Adding in a little more now.
Goldman Sachs now expects the Federal Reserve to begin cutting interest rates in September, moving its forecast forward from December, as the inflation impact of U.S. tariffs appears smaller than previously thought.
The bank sees slightly better-than-even odds of a September cut, citing multiple potential drivers:
- muted tariff effects,
- broader disinflationary trends,
- signs of labour market weakness, even if temporary.
Chief economist Jan Hatzius and his team believe the Fed views tariffs as producing only a one-off price level shift, not sustained inflation.
Goldman now forecasts three 25-basis-point cuts this year — in September, October, and December — and lowers its estimate for the Fed’s terminal rate to 3.00–3.25% (previously 3.50–3.75%).
While not expecting a move in July, they note a rate cut could come earlier if jobs data significantly disappoints. The labour market remains broadly healthy, but Goldman warns that hiring has become more difficult, and risks from seasonal quirks and immigration shifts could weigh on near-term payroll numbers.
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