Goldman Sachs Pushes Back Rate Cut Forecast to 2027 Amid Strong Jobs Report

Goldman Sachs has revised its forecast for Federal Reserve interest rate cuts, pushing them back to December 2027 after a stronger-than-expected US labor market report. The bank now expects two rate cuts in June and December 2027, instead of December 2026 and March 2027.

The jobs report showed the US economy added 172,000 jobs in May, with the unemployment rate holding at 4.3%. This payroll gain was more than double expectations in some surveys, making it harder for the Fed to justify rate cuts this year.

Goldman's revised call reflects a broader change in market psychology, as investors now expect the Fed to keep policy unchanged through 2026 or even consider a hike if inflation pressures intensify. Rate futures moved quickly after the report, with markets pricing in a 68.4% chance of a Fed rate increase by December.

While Goldman is not alone in pushing back its expectations, other banks such as Nomura have also forecast that the Fed could remain on hold through 2026. The stronger jobs data has rattled financial markets, with stocks falling sharply Friday as investors reconsidered the path of interest rates.