Goldman Sachs: "No Rate Cuts This Year"... Market Diverges from Trump

Goldman Sachs, the U.S. investment bank, has revised its outlook, now expecting that the Federal Reserve (Fed) will not cut its benchmark interest rate this year. Concerns about inflation stemming from the Iran war are increasingly permeating Wall Street.

Reuters Yonhap News

According to Bloomberg on June 7 (local time), Goldman Sachs has pushed back its forecast for the Federal Reserve’s rate cuts from the previously expected December 2026 and March 2027 to June and December 2027. Effectively, this withdraws the projection for a rate cut this year.

Goldman Sachs’ revised outlook came after U.S. job growth in May surpassed market expectations. Nonfarm payrolls in the U.S. increased by 172,000 in May compared to the previous month, exceeding the 80,000 rise anticipated by experts, according to Dow Jones. Bloomberg noted that robust employment figures have demonstrated the strength of the labor market, and that additional upward pressure on prices due to the Iran war is fueling expectations that the Fed could even consider a rate hike this year. However, Goldman Sachs maintains that the likelihood of a rate increase remains low.

David Mericle, chief U.S. economist at Goldman Sachs, explained, “Fed officials’ long-term rate forecasts have remained largely unchanged over the past year. Most members view the current policy stance as moderately restrictive and believe that, if inflation moderates, a return to normal interest rates would be possible.” Mericle added, “The probability of inflation persisting autonomously appears low. Our base scenario at Goldman Sachs is still for two 25-basis-point rate cuts next year.” However, he noted that the likelihood of this scenario has decreased from 40% to 30%.

Recently, other global investment banks have also adopted more cautious outlooks on rates. Bank of America previously projected that the Fed would keep rates unchanged this year and cut them twice in July and September 2027. Some institutions, such as Morgan Stanley and Barclays, have also forecast that a rate cut this year is unlikely.

Contrary to market expectations, U.S. President Donald Trump continues to argue that rates should be lowered. In an interview with NBC, he stated, “These days, when good economic data comes out, the market (the stock market) actually falls because of fears of a rate hike,” adding, “There is absolutely no reason to raise rates.” President Trump further emphasized, “Raising the benchmark interest rate is a mistake. On the contrary, rates should be cut.”

His comments are expected to put pressure on Fed Chair Kevin Warsh, who will preside over the first FOMC meeting scheduled for June 16–17. President Trump recently remarked, “I have great respect for him (Chair Warsh),” but added, “However, in my view, the country’s economy should not be punished by an immediate rate hike when things are going well.”

This content was produced with the assistance of AI translation services.