Goldman Sachs Forecasts First Fed Cut in Dec 2026

Goldman Sachs has revised its forecast for U.S. Federal Reserve interest rate cuts, now projecting the first reduction in December 2026 followed by another in March 2027. The investment bank cited persistent inflation pressures, driven by elevated energy costs, as the primary reason for pushing back its previous expectations of cuts later this year.

The update, detailed in a May 8 research note, comes amid inflation running above the Fed's 2 percent target. Core Personal Consumption Expenditures (PCE) prices, the central bank's preferred gauge, are expected to remain near 3 percent throughout 2026 due to pass-through effects from higher energy prices linked to the ongoing Middle East conflict. A Goldman Sachs analysis stated that "a combination of lower monthly inflation prints after the oil shock fades and further labor market softening will likely be needed" before the Federal Open Market Committee (FOMC) eases policy.

The U.S. labor market has shown resilience, with 115,000 jobs added in April 2026, sustaining wage pressures and reducing the urgency for rate cuts. Fed officials held the federal funds rate steady at 3.50 percent to 3.75 percent during their April 29 meeting, a...