Goldman Sachs: No Longer Expects Fed to Cut Rates This Year Due to Strong Labor Market

BlockBeats News, June 8th, a Goldman Sachs economist stated that due to a stronger-than-expected labor market, the Fed is no longer expected to cut interest rates this year. The bank has pushed back its expected timing for the Fed's last two rate cuts from December 2026 and March 2027 to June 2027 and December 2027.

However, Goldman's Chief U.S. Economist, Mericle, pointed out that due to inflation "seemingly unlikely to become self-sustaining," the possibility of the Fed raising rates remains slim. The strong job growth in May, exceeding all expectations, has shown the resilience of the labor market and intensified market bets on the central bank's rate hikes.

Goldman continues to believe that the likelihood of a rate hike is low but has raised the probability of a small rate hike from 10% to 20%. The bank's baseline forecast still expects two 25-basis-point rate cuts next year, but the probability has decreased from 40% to 30%. Goldman has also lowered its forecast for this year's U.S. unemployment rate from the previous 4.6% to 4.4%.