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Benzinga @Benzinga on x 307.1K followers
Created: 2025-07-28 22:59:58 UTC
Goldman Sachs is doubling down on its view that the Federal Reserve will cut interest rates more aggressively than markets currently expect. The firm now projects five total cuts—three in 2025 and two more in 2026—bringing the Fed Funds rate down to a range of X to 3.25%.
In a note published Monday, Goldman economist David Mericle said he expects no change at this week’s Fed meeting, but sees cuts coming in September, October, and December. He pointed to slowing consumer spending, weakness in housing investment, and growing policy uncertainty as key signs that economic growth is cooling.
Goldman believes the inflation fight is largely won. The labor market is rebalancing, and core inflation is trending back toward the Fed’s X% target. The only short-term risk comes from tariffs, which the firm expects will cause a one-time bump in inflation—not a sustained increase.
Despite Goldman's forecast, markets remain cautious. Fed futures point to a higher chance of just two cuts in 2025, and other prediction markets place even lower odds on Goldman’s three-cut scenario.
The Fed is expected to hold rates steady this week. Goldman doesn’t anticipate strong forward guidance but expects the tone on growth to soften.
If inflation continues to ease and growth slows further, markets may be underestimating how quickly the Fed will pivot.
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