Goldman Sachs has delayed its Federal Reserve rate cut forecast by one quarter. The bank now expects the first cut in December 2026 and the second in March 2027. Energy cost passthrough is keeping core PCE inflation closer to 3% than the Fed’s 2% target, pushing back the timeline for any policy easing.
April’s nonfarm payrolls came in at 115,000. Stable enough to remove pressure on the Fed to act. With the labour market no longer the concern, the Fed’s focus has shifted entirely to containing inflation.
“The Fed will shift its focus to containing upside inflation risks now that the labour market appears back on track,” said Goldman Sachs Asset Management’s Lindsay Rosner. “The FOMC could feel compelled to remove the easing bias from its June statement, suggesting hawks are gaining the upper hand.”
Wall Street Is Deeply Split
According to Wall Street Journal data tracking major institutional forecasts, the outlook is now divided:
- No cuts in 2026: BNPP, HSBC, JP Morgan, MPA Macro, and RBC all forecast indefinite hold
- First cut September 2026: Jefferies, Nomura, TD Securities, and Wells Fargo
- Delayed further: Bank of America sees July 2027, Morgan Stanley sees January 2027
- Most dovish: Citigroup and MUFG forecast 75 basis points of cuts still in 2026
Expert Nick Timiraos noted that roughly half of all major forecasters now see no cuts this year at all, and that group is growing as forecasts move in one direction once momentum builds.
Fed Internally Divided
At last week’s FOMC meeting, three regional presidents voted against the post-meeting statement. Not against holding rates but against forward guidance language widely interpreted as signaling future cuts. The 8-4 vote marked the Fed’s most divided decision since 1992. If June’s statement drops the easing bias entirely, it confirms the hawks have taken control.
Hence, the case for 2026 rate cuts is weakening across the board. Inflation is not cooperating, the jobs market is stable enough to remove urgency, and the Fed’s internal dynamics are shifting toward caution.
Related: Fed Shifts Attention to Inflation as April Hiring Eases Rate Cut Pressure
