Goldman Sachs has adjusted its Fed rate cut outlook, sees a higher risk of deeper easing if recession hits.

Earlier:

Goldman Sachs expects the Federal Reserve to begin a series of interest rate cuts in June—earlier than its previous forecast of July—as part of a precautionary easing cycle. Under its base case, which assumes the U.S. avoids a recession, the Fed would deliver three consecutive 25 basis point cuts, bringing the federal funds rate down to a range of 3.5%–3.75%.

However, if the economy does fall into recession, Goldman anticipates a more aggressive policy response, with the Fed slashing rates by approximately 200 basis points over the next year.

Factoring in the increased likelihood of a recession, the bank’s weighted forecast now calls for a total of 130 basis points in rate cuts for 2025—up from 105 basis points previously. That outlook is now broadly aligned with current market expectations as of Friday’s close.