Goldman Sachs says the Federal Reserve is increasingly likely to keep interest rates unchanged through the rest of the year as economic conditions remain stronger than previously expected.
Goldman Sachs Research has pushed back its forecast for the final two interest rate cuts of the current easing cycle. The bank now expects the Fed to lower rates in June 2027 and December 2027, compared with its prior forecast of December 2026 and March 2027.
The revised outlook follows stronger-than-expected economic data in the US, including continued resilience in the labor market and consumer spending. Goldman says recent employment figures have reduced the likelihood that policymakers will feel pressure to cut rates in the near term.
The firm expects the unemployment rate to rise only modestly from current levels, reaching approximately 4.4% by the end of the year. According to Goldman, that level would likely remain too low to justify an accelerated easing cycle from the Federal Reserve.
Inflation also remains a key factor in the bank’s outlook. Goldman expects core inflation to stay above 3% through 2026 before gradually moving closer to the Fed’s long-term 2% target in 2027.
The report notes that several factors continue to support inflationary pressures, including tariffs, elevated energy prices, ongoing geopolitical tensions in the Middle East and continued investment tied to artificial intelligence infrastructure.
As a result, Goldman believes the Federal Open Market Committee (FOMC) will remain cautious about lowering rates until inflation shows more sustained progress toward its target.
Under the firm’s updated forecast, the federal funds rate would eventually decline to a range of 3.0% to 3.25% following the anticipated rate cuts in 2027.
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