Goldman Sachs has postponed its forecast for a Federal Reserve interest rate cut by one quarter. The central bank currently expects the first rate cut to occur in December 2026 and the second in March 2027. Energy cost pass-through has pushed core PCE inflation closer to 3% than the Fed’s 2% target, pushing back the timeline for policy easing.
Nonfarm employment in April was 115,000. Sufficient stability to remove pressure to act on the Fed. With the labor market no longer a concern, the Fed’s focus shifted entirely to controlling inflation.
“Now that the labor market appears to be back on track, the Fed will likely shift its focus to containing upside risks to inflation,” said Lindsey Rosner of Goldman Sachs Asset Management. “The FOMC may feel forced to remove the easing bias from its June statement, suggesting hawks are gaining ground.”
Wall Street is deeply divided
The outlook is currently split, according to data from the Wall Street Journal, which tracks forecasts from major financial institutions.
- No interest rate cuts in 2026: BNPP, HSBC, JP Morgan, MPA Macro, and RBC all expected to remain unchanged indefinitely
- First Cut September 2026: Jefferies, Nomura, TD Securities, Wells Fargo.
- Further postponements: Bank of America expects July 2027, Morgan Stanley expects January 2027
- Most dovish: Citigroup and MUFG expect continued 75 basis point cuts in 2026
Expert Nick Timiraos noted that about half of the major forecasters currently see no cuts at all this year, a group that is growing as momentum builds and forecasts move in one direction.
Internal division of the Fed
At last week’s FOMC meeting, three regional presidents voted against the post-meeting statement. Rather than opposing interest rate holding, we object to forward guidance language that is widely interpreted as implying future rate cuts. The 8-4 vote marked the Fed’s most divisive decision since 1992. If the June statement completely eliminates the easing bias, it will mean that the hawks have taken the lead.
Therefore, the rationale for a rate cut in 2026 is weakening overall. Inflation is uncooperative, the job market is stable enough to remove any sense of urgency, and the Fed’s internal dynamics are shifting toward caution.
Related: Fed shifts attention to inflation as April adoption eases rate cut pressure
