Goldman Sachs's 2025 Fed Forecast

New York, NY - Investment banking giant Goldman Sachs has updated its forecast for the Federal Reserve's interest rate policy, and it's good news for borrowers! borrowers! 🎉 Economists at the firm are now predicting a more aggressive series of rate cuts in 2025 than previously anticipated.

Citing a combination of a cooling labor market and less inflationary pressure from tariffs than expected, Goldman Sachs now projects three quarter-point interest rate cuts by the Federal Reserve in the latter half of 2025. 📉

This is a significant shift from their earlier, more conservative predictions of one or two cuts.

The anticipated timeline for these reductions is as follows:
〰️September 2025: The first 0.25% cut.
〰️October 2025: A second 0.25% reduction.
〰️December 2025: The third and final 0.25% cut for the year.

Looking further ahead, Goldman Sachs envisions the Fed continuing to ease its monetary policy into 2026 with two additional rate cuts. If this forecast holds true, the cumulative effect would bring the target range for the federal funds rate down to 3.00% - 3.25%. 🎯

Key Drivers Behind the Dovish Outlook 🦅
Goldman's more optimistic outlook on rate cuts is underpinned by two main factors:
〰️Muted Impact from Tariffs: The inflationary effects of tariffs have been less pronounced than initially feared, giving the Fed more leeway to stimulate the economy without stoking rising prices. 🏷️➡️💸
〰️Softening Labor Market: While still robust by historical standards, the labor market is showing signs of slowing down. This easing of wage pressures helps to temper inflation and provides the Federal Reserve with a reason to adopt a more accommodative stance. 💼➡️🚶‍♂️

This updated forecast from a major Wall Street player suggests a potential shift in the economic landscape, offering a glimmer of hope for those impacted by higher borrowing costs.