Goldman Sachs Damps Rate Hike Expectations, Sees Pause Until 2027

Goldman Sachs is warning investors that market expectations for US Federal Reserve interest rate hikes are overly aggressive. The investment bank's chief economist, Jan Hatzius, points to cooling inflation and softer jobs data as reasons to expect a continued pause in rates for the rest of 2026.

The bank bases this view on recent economic indicators from the US, including weaker retail sales and disappointing employment numbers. According to Goldman Sachs' baseline forecast, these trends suggest that a rate increase in the near term is highly unlikely.

Instead, the firm expects the Fed to keep rates steady in the 3.50% to 3.75% range for the remainder of 2026. This could shift global market sentiment and influence foreign fund flows.