--- title: "Goldman Sachs Expects Earliest Fed Interest Rate Cut in December, Delaying Previous Forecast by One Quarter" type: "News" locale: "en" url: "https://longbridge.com/en/news/285805655.md" description: "Interest-Rate Cuts face another setback! Dragged down by the Middle East situation and sticky inflation, Goldman Sachs expects the Federal Reserve to implement an Interest rate cut no earlier than December 2026. Goldman Sachs warns that subsequent easing requires a dual approach of \"falling inflation + weakening employment,\" significantly raising the threshold, and the market needs to prepare for a \"protracted war\" of high interest rates" datetime: "2026-05-09T09:13:23.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/285805655.md) - [en](https://longbridge.com/en/news/285805655.md) - [zh-HK](https://longbridge.com/zh-HK/news/285805655.md) --- # Goldman Sachs Expects Earliest Fed Interest Rate Cut in December, Delaying Previous Forecast by One Quarter Affected by rising energy costs driven by the Middle East conflict and inflation persisting above expectations, Goldman Sachs has pushed back the timing of the next two Federal Reserve Interest-Rate Cuts by one quarter each, further cooling market expectations for monetary policy easing. In a report on May 8, Goldman Sachs U.S. economists revised their expectations for the next two Fed Interest-Rate Cuts to December 2026 and March 2027, respectively, delaying each by one quarter compared to previous forecasts. Goldman Sachs believes that the pass-through effect of energy costs will keep core PCE inflation close to 3% throughout the year, far above the Federal Reserve's 2% policy target, making conditions for an Interest rate cut difficult to mature. The Federal Reserve kept interest rates unchanged at the end of last month, but the meeting revealed that uncertainties arising from the Middle East conflict disrupting global energy markets are exacerbating divisions within the Federal Open Market Committee (FOMC) regarding the policy outlook. Goldman Sachs' latest forecast further reinforces market concerns about a delayed Interest-Rate Cuts schedule. ## Higher Threshold for Interest-Rate Cuts Requires Simultaneous Softening of the Labor Market Goldman Sachs economists pointed out that for the FOMC to initiate an Interest rate cut within this year, two conditions must be met simultaneously: first, a significant decline in monthly inflation data after the oil price shock subsides, and second, a further softening of the labor market. Both are indispensable. This statement implies that relying solely on improvements in inflation data is insufficient to trigger Interest-Rate Cuts; a cooling of the job market is also a necessary prerequisite for Federal Reserve action. The threshold for a policy shift is significantly higher than previously expected by the market. ## Terminal Rate Forecast Unchanged, Most Officials Still Expect Room for Further Interest-Rate Cuts Despite the delay in the timing of Interest-Rate Cuts, Goldman Sachs maintains its forecast for the Federal Reserve's terminal rate at 3% to 3.25%, reasoning that the FOMC members' assessment of the neutral rate remains generally stable. Goldman Sachs economists noted that most officials still expect at least several more Interest-Rate Cuts eventually. This judgment indicates that Goldman Sachs does not believe this round of the Interest-Rate Cuts cycle has ended, but rather that the pace is slower than previously expected. Regarding the economic outlook, Goldman Sachs has lowered the probability of a U.S. recession in the next 12 months by 5 percentage points to 25%. However, the bank also pointed out that this figure remains higher than the baseline estimate of 20% before the outbreak of war in Iran, indicating that the downside risks to the U.S. economy from the Middle East situation have not completely dissipated. ### Related Stocks - [GS-D.US](https://longbridge.com/en/quote/GS-D.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [GS-A.US](https://longbridge.com/en/quote/GS-A.US.md) - [GS-C.US](https://longbridge.com/en/quote/GS-C.US.md) - [XLF.US](https://longbridge.com/en/quote/XLF.US.md) - [IAI.US](https://longbridge.com/en/quote/IAI.US.md) - [VFH.US](https://longbridge.com/en/quote/VFH.US.md) - [FNCL.US](https://longbridge.com/en/quote/FNCL.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) ## Related News & Research - [Goldman Sachs-Backed Ramp Charges Toward a Stunning $40 Billion Valuation](https://longbridge.com/en/news/285771774.md) - [Goldman taps Feldgoise, Schiffrin; Fidelity to cut 800 staffers](https://longbridge.com/en/news/285773545.md) - [Lime files to go public in New York](https://longbridge.com/en/news/285704625.md) - [Goldman Sachs' private credit fund cuts value by 3.7%](https://longbridge.com/en/news/285747946.md) - [The Goldman Sachs Group, Inc. $GS Shares Sold by Heartland Bank & Trust Co](https://longbridge.com/en/news/285196211.md)