Goldman Sachs is forecasting the Fed to cut interest rates on a series of occasions starting in September. The forecast comes ahead of the Jackson Hole Global Central Bank Annual Meeting next week, where central bankers from around the world will gather to discuss monetary policy.
Goldman Sachs’ U.S. economists predict a 25 basis point cut at three meetings in September, November and December, followed by a quarterly cut next year and another in 2026. That would bring the federal funds rate down significantly from 5.375% to around 3.375%.
While this outlook points to a more dovish Fed than previously expected, it is important to note that Goldman Sachs economists are not predicting a recession in the near future.
The market has shown signs of resilience, with the S&P 500 index recouping all of its losses from earlier this month and nearing an all-time high. But Goldman Sachs chief trader Tony Pasquariello warns against complacency. He believes trading conditions will remain volatile, especially as we head into a busy fall season from August, when liquidity is tight.
The Fed's decision on interest rates will depend largely on economic data, particularly the jobs report and financial conditions, the analyst said. A surprisingly weak jobs report or a significant tightening in financial conditions could prompt the Fed to act more aggressively than currently anticipated.
*This is not investment advice.