Goldman Sachs' latest forecast: The Federal Reserve will cut interest rates twice this year, with the first cut delayed until September.

Goldman Sachs economists have adjusted their expectations for the timing of the first interest rate cut by the Federal Reserve this year, noting that rising oil prices and heightened geopolitical tensions in Iran have increased inflation risks. The institution stated in its latest research brief that it now anticipates the Federal Open Market Committee (FOMC) to begin a policy easing cycle in September, rather than the previously predicted June. Despite the delay in the first rate cut, Goldman Sachs still maintains its baseline forecast of two rate cuts this year, with the possibility of a second rate cut in December. Economists stated, "If the labor market weakens earlier and more than we expected, we believe concerns about rising oil prices pushing up inflation and inflation expectations will not be a hindrance to an earlier rate cut." This change in perspective reflects Goldman Sachs' reassessment of the inflation outlook following recent spikes in energy prices. Economists further emphasized that, given the upward revision of inflation forecasts due to oil supply shocks related to Middle East geopolitical tensions, the original plan to cut rates in June "now seems premature." Goldman Sachs maintains its core judgment: persistent cooling of inflation and gradual weakness in the labor market will eventually create room for Fed policy easing. The institution predicts that by September, further slowing of core inflation combined with a moderate weakening in the labor market will strengthen the case for a rate cut. In terms of inflation forecasts, Goldman Sachs has raised its inflation expectations related to oil supply shocks. The current forecast shows that by the end of 2026, the overall Personal Consumption Expenditures (PCE) inflation rate in the United States will reach 2.9%, with core PCE at around 2.4%; if energy prices continue to rise, there is further upside risk to overall inflation. At the same time, due to the triple drag of rising oil prices, tightening financial conditions, and high geopolitical risks, Goldman Sachs has also downgraded its economic growth prospects - lowering its forecast for the annualized GDP growth rate in the fourth quarter of 2026 from the previous estimate to 2.2%.