Goldman Sachs Delays Fed Rate Cut Forecast to 2026 Amid Rising Inflation Concerns

Goldman Sachs has pushed back its forecast for U.S. Federal Reserve interest rate cuts, now expecting reductions in December 2026 and March 2027 instead of the previously projected September and December 2026 cuts. The investment bank cited persistent inflation pressures driven by rising energy prices as the key reason behind the revised outlook.

The change reflects growing caution among major global brokerages regarding the Federal Reserve’s monetary policy path. As the ongoing Middle East conflict enters its 10th week, higher oil and energy costs continue to fuel inflation concerns, making policymakers hesitant to begin easing interest rates.

According to Goldman Sachs, elevated energy prices are likely to keep core Personal Consumption Expenditures (PCE) inflation closer to 3% rather than the Fed’s 2% target throughout the year. The bank stated that softer labor market conditions and weaker monthly inflation data would likely be necessary before the Federal Open Market Committee (FOMC) considers rate cuts.

The Federal Reserve kept interest rates unchanged during its April 29 meeting, maintaining the benchmark rate between 3.50% and 3.75%. The decision came in an unusually close 8-4 vote, marking the most divided outcome since 1992 and highlighting growing uncertainty among policymakers over inflation and economic growth.

Market expectations also support a prolonged pause in rate cuts. Data from the CME FedWatch Tool indicates that traders largely expect the Fed to hold rates steady through the remainder of the year.

Goldman Sachs added that if the U.S. labor market remains resilient and inflation fails to cool sufficiently, the Fed may delay easing further and implement only two final rate cuts in 2027. The brokerage expects inflation to gradually return to the Fed’s long-term 2% target by then, allowing policymakers more flexibility to loosen monetary policy.