From last week:
Goldman Sachs have pumped out more on this call. The firm expects the Federal Reserve to begin cutting interest rates three months earlier than previously forecast, the shift reflects early signs that tariff-related inflation is proving milder than expected and that disinflationary forces — including moderating wage growth and weakening demand — are building.
Chief U.S. economist David Mericle estimates the odds of a September cut are “somewhat above” 50%, with 25 basis point cuts pencilled in for September, October, and December, and two more in early 2026. Goldman has also lowered its terminal rate forecast to 3%–3.25%, down from 3.5%–3.75%.
The firm notes that while the labour market still appears healthy, it’s become “hard to find a job”, and job openings have begun to decline. Seasonal effects and immigration shifts may weigh further on payrolls. A weaker-than-expected employment report could nudge the Fed toward action.
On inflation, Goldman sees less passthrough from tariffs, and inflation expectations have cooled — helped by fading pandemic distortions and some technical quirks in consumer surveys.
Although the Fed has tried to set a higher bar for cuts than in 2019, Goldman says growing uncertainty — including Powell’s approaching term end and unchanged June dot plots — leaves room for policy flexibility in the months ahead.
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