Goldman Sachs economists said stronger-than-expected U.S. labor market means
they no longer expect the Fed to cut rates this year. The bank pushed back its
timing for the Fed’s final two cuts from Dec 2026 and Mar 2027 to Jun 2027 and
Dec 2027. Chief U.S. economist David Mericle said inflation “seems unlikely to
become self-sustaining,” keeping the odds of further Fed hikes low. May U.S. job
gains beat forecasts, reinforcing market bets on additional tightening; Goldman
raised the probability of a small hike this year from 10% to 20%. Its baseline
still assumes two 25bp cuts next year, but the chance of that scenario was
lowered from 40% to 30%. Goldman also revised down its U.S. unemployment
forecast for this year to 4.4% from 4.6%.
