Goldman Sachs: Due to a strong labor market, no longer expects the Federal Reserve to cut interest rates this year

BlockBeats News, June 8 — Goldman Sachs economists stated that, due to a labor market that is stronger than expected, they no longer anticipate that the Federal Reserve will cut interest rates this year. The firm has pushed back its prior timing expectations for the Fed’s last two rate cuts from December 2026 and March 2027 to June 2027 and December 2027, respectively.

However, Goldman Sachs Chief U.S. Economist Merrick pointed out that, since inflation “seems unlikely to become self-sustaining,” the likelihood of the Fed raising interest rates remains low. U.S. job growth in May exceeded all expectations, showing that the labor market has resilience and increasing market bets that the central bank will raise rates.

Goldman Sachs continues to believe that the probability of rate hikes is low, but has increased the probability of a small rate increase from 10% to 20%. The firm’s baseline forecast still expects two 25 basis point rate cuts next year, but the probability has been lowered from 40% to 30%. Goldman Sachs also revised down its forecast for the U.S. unemployment rate this year from 4.6% to 4.4%.