Goldman Sachs Delays Fed Rate Cuts to Mid-2026 After Jobs Data Shift
Goldman Sachs has changed its view on U.S. monetary policy. The bank now expects Fed rate cuts later than previously forecast. This update follows new signals from the labor market. Earlier, Goldman predicted rate cuts in March and June 2026. However, it now sees two smaller cuts in June and September 2026. Each cut is expected to be 25 basis points. The revision comes after softer U.S. jobs data. Non farm payroll growth showed signs of cooling. As a result, economists see a slower path for policy easing.
What Changed in the Economic Picture
The labor market appears weaker than before. Job gains have slowed, and hiring momentum looks fragile. However, the market has not collapsed. At the same time, GDP growth remains stronger than expected. This strength gives the Federal Reserve more room to wait. Therefore, policymakers may avoid early action. Inflation trends also played a key role. Prices continue to ease toward the Fed’s target. In addition, earlier tariff-related price pressures are fading.
Inflation Progress and Policy Timing
Goldman noted clear progress on inflation. However, temporary tariff effects had hidden this improvement. With those effects fading, inflation data now looks cleaner.
David Mericle, Goldman’s chief U.S. economist, explained the shift. He said the Fed may wait until mid year as inflation cools further. Meanwhile, officials want to ensure job markets stabilize.
This cautious approach reduces the urgency for quick cuts. As a result, policy easing may happen later but more smoothly.
Lower Recession Risks Ahead
Goldman also updated its recession outlook. The bank cut its 12-month recession probability to 20 percent. Earlier, it stood at 30 percent. The firm now expects the Fed funds rate to end 2026 between 3 and 3.25 percent. This level suggests gradual easing, not aggressive stimulus.
However, risks remain. The labor market could weaken further if growth slows. Even so, current data supports patience rather than panic. Overall, Goldman’s revised forecast reflects balance. Growth remains solid, inflation improves, and risks look more contained. Therefore, Fed rate cuts may arrive later, but with greater confidence
