Goldman Sachs pushes Fed cut view into 2027 as labour strength delays easing

GS now expects the final two Fed rate cuts in June and December 2027, with no cuts seen this year. It says that stronger-than-expected labour market activity supports delaying further easing until tariff, war and AI-demand effects fade, and core PCE inflation nears 2%. Goldman raised the probability of modest rate hikes to 20% (from 10%), though its baseline remains that hikes are unlikely as inflation appears unlikely to become self-sustaining; it assigned only a 30% probability to its baseline of two 25bps cuts in 2027. GS adds that rate hikes remain unlikely, though slightly more likely than previously thought; the terminal rate forecast stays at 3-3.25%. The bank revised its 2026 US unemployment forecast down to 4.4% (from 4.6%).