Goldman Sachs Forecasts Fed Holding Rates at 5.25%-5.50% Until December 2026
Goldman Sachs economists forecast the Fed will hold its policy rate at 5.25%-5.50% through year-end and implement a 25 bp cut in December 2026. The bank cites persistent 4% core inflation and slowing job growth as reasons for delaying easing, which could pressure trading revenues and net interest margins.
1. Fed Rate Outlook
Goldman Sachs economists now project the Federal Reserve will maintain its target range of 5.25%–5.50% until a single 25 basis-point reduction in December 2026, extending the current pause beyond earlier expectations of mid-year easing.
2. Underlying Economic Conditions
The bank highlights continued core inflation near 4%, monthly payroll gains moderating below 200,000, and tighter credit conditions as key factors prompting a delayed shift to rate cuts despite slowing growth trends.
3. Market and Business Implications
An extended high-rate environment may damp trading volatility and advisory deal flow while compressing net interest margins, prompting Goldman Sachs to adjust revenue forecasts for its fixed-income and investment banking divisions.