Goldman Sachs says Fed will hold rates steady in 2026

Goldman Sachs has revised its forecast for the Federal Reserve, predicting the central bank will hold its benchmark interest rate steady throughout 2026 and not begin cutting until 2027. The investment bank's economists cited a stronger-than-expected labor market and persistent inflation as the reasons for the change.

The forecast shift, announced on June 7, 2026, follows a U.S. jobs report showing employers added 172,000 jobs in May while the unemployment rate held at 4.3%. Goldman Sachs economist David Mericle stated the data removes any urgency for the Fed to lower rates this year. The bank now expects the first rate cuts to occur in June and December of 2027, a significant delay from its previous projection of cuts beginning in late 2026.

Goldman Sachs pointed to several forces keeping inflation elevated, including tariffs, higher oil prices linked to Middle East conflict, and demand from artificial intelligence. The bank expects these pressures to keep year-over-year core PCE inflation above 3% for all of 2026, with inflation falling closer to the Fed's 2% target only in 2027. Mericle noted that underlying indicators, such as wage growth and leading measures for rent,...