Goldman Sachs lowers Fed rate cut expectations, marking a key turning point in the interest rate policy path

Wall Street’s assessment of the Federal Reserve’s monetary policy path experienced a significant revision in 2024, and when looking back in 2026, this change is still regarded as one of the key turning points. At that time, Goldman Sachs substantially adjusted its forecast for the Fed’s rate cut timetable, delaying the first easing from the originally expected March to June, and anticipating a further rate cut in September, each by 25 basis points. This judgment was first disclosed by Walter Bloomberg on the X platform, sparking widespread market attention.

From the background, Goldman Sachs’s adjustment was not an isolated event but based on a reassessment of a series of macroeconomic data. At that time, the Federal Reserve kept the benchmark interest rate in the range of 5.25% to 5.50%, at its highest level in over twenty years. Goldman Sachs believed that before inflation had firmly fallen back to the 2% target, it was necessary to extend the tightening cycle to avoid the risks of premature easing.

Specifically, the resilience of the labor market was one of the key factors. Relevant data showed that the labor market performed better than expected, consumer spending remained stable, and although inflation was trending downward, it still showed stickiness in the service sector. Overall, these signals weakened the rationale for a rapid rate cut and reinforced the view of “starting easing in the middle of the year.”

In terms of policy communication, Federal Reserve Chair Jerome Powell repeatedly emphasized a data-driven decision-making logic, clearly stating the need to build greater confidence in the continued decline of inflation. Several Federal Open Market Committee members also expressed similar attitudes, which to some extent supported Goldman Sachs’s delayed rate cut forecast.

From a market impact perspective, delaying rate cuts meant that borrowing costs would remain high for a longer period, having profound effects on consumer credit, corporate financing, and asset pricing. However, from another angle, this pace helped to solidify inflation expectations and enhance the attractiveness of dollar assets.

Looking back, Goldman Sachs’s judgment at the time aligned with the subsequent adjustments of many other institutions, reflecting Wall Street’s cautious re-pricing of the Fed’s policy pace in the face of a complex economic environment. This change provides an important reference for understanding the subsequent evolution of the interest rate cycle.