Goldman Sachs: Due to a strong labor market, no longer expects the Federal Reserve to cut interest rates this year
According to Jinshi reports, Goldman Sachs economists stated that due to a stronger-than-expected labor market, they no longer expect the Federal Reserve to cut interest rates this year. The bank has pushed back the expected timing of the last two rate cuts from December 2026 and March 2027 to June and December 2027. However, Goldman Sachs' chief U.S. economist, Jan Hatzius, pointed out that the likelihood of the Federal Reserve raising interest rates remains low as inflation "seems unlikely to become self-sustaining."
In May, U.S. job growth exceeded all expectations, demonstrating the resilience of the labor market and intensifying market bets that the central bank will raise interest rates. Goldman Sachs continues to believe that the likelihood of a rate hike is low, but has slightly increased the probability of a small rate hike from 10% to 20%. The bank's baseline forecast still anticipates two rate cuts of 25 basis points next year, but the probability has been reduced from 40% to 30%. Goldman Sachs also lowered its U.S. unemployment rate forecast for this year from 4.6% to 4.4%.
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