Goldman Sachs now expects Fed to deliver two rate cuts in late 2027 instead of 2026–2027 window

Goldman Sachs has revised its forecast for U.S. Federal Reserve rate cuts, now anticipating two reductions in late 2027 rather than within the 2026–2027 window previously expected. The firm cited persistent inflationary pressures, particularly from elevated energy prices, as the primary reason for the delay. Goldman now forecasts the first cuts to occur in December 2026 and March 2027, but only if inflation shows sufficient signs of cooling and the labor market weakens further.

The Fed has maintained its benchmark interest rate in the 3.50% to 3.75% range since its April 2026 meeting, with policymakers divided on the appropriate path forward. The central bank has emphasized need for more evidence that inflation is trending toward its 2% target before considering rate cuts. Goldman’s economists argue that core PCE inflation remains near 3% through 2026, complicating the case for near-term easing.

The ongoing conflict in the Middle East has exacerbated inflation by driving up energy prices, with Brent crude rising sharply since late February 2026. This "oil shock" has added to uncertainty and limited the Fed’s flexibility in adjusting policy. Other major banks, including JPMorgan and Barclays, have also tempered their expectations for rate cuts in 2026, with forecasting no reductions until early 2027.

Goldman’s updated forecast underscores a slower path to lower rates, with a terminal rate of 3% to 3.25% expected by the end of the tightening cycle. This adjustment reflects the Fed’s cautious stance and need for stronger disinflationary signals before policymakers consider easing monetary policy.