Goldman Sachs Sees No Rate Cuts in 2026, Trump Sees No Reason

• Goldman Sachs no longer expects Federal Reserve rate cuts in 2026, as per reports.
• The banking giant pushed its easing forecast to June and December 2027.
• President Trump opposed a tighter policy, arguing there is no reason to raise rates.

Goldman Sachs has dropped its expectation for Federal Reserve rate cuts this year after the US labor market came in stronger than expected.

The bank now expects the Fed’s next two quarter-point cuts to happen in June and December 2027. Previously, Goldman had expected those cuts in December 2026 and March 2027.

The change followed May’s jobs report, which showed 172,000 new jobs, nearly double market expectations of 88,000 and well above April’s 115,000.

The unemployment rate held steady around 4.3%, while Goldman lowered its own year-end unemployment forecast to 4.4% from 4.6%.

Chief US economist David Mericle said the labor market remains stronger than previously expected and does not provide a strong reason for the Fed to start cutting rates.

Higher-for-Longer View Gains Support

Goldman still expects two rate cuts eventually, but confidence in that view has weakened. The bank lowered the probability of its base case from 40% to 30%. At the same time, it doubled the chance of a rate hike to 20% from 10%.

Goldman assigned a 25% probability to rates staying unchanged and another 25% probability to a recession scenario that would force larger cuts.

The bank believes inflation pressures from tariffs, geopolitical tensions, and AI-driven investment demand could keep borrowing costs elevated for longer.

Goldman expects core PCE inflation to remain above 3% through 2026. Core PCE stood at 3.3% in April, still far above the Fed’s 2% target.

The bank argues that inflation should eventually move back toward 2% in 2027 because wage growth remains below levels associated with persistent inflation and rent indicators continue to soften.

Markets Start Pricing In Tightening

Stronger economic data has changed market expectations. Bond traders have fully priced in a 25-basis-point rate hike by December. Treasury markets sold off sharply after the employment report, while the Nasdaq 100 fell more than 5%.

Several analysts expect the June 16-17 Federal Open Market Committee meeting under new Fed Chair Kevin Warsh to remove any language pointing to near-term easing. Policymakers are also expected to release projections showing higher inflation and interest-rate expectations than in March.

Economists expect May CPI data, due before the meeting, to show annual inflation rising to 4.2%, the highest level in more than three years, driven by energy, commodity, and fertilizer prices.

Trump Pushes Back Against Rate-Hike Expectations

President Donald Trump publicly rejected the idea that the Federal Reserve should raise rates. Speaking to NBC’s “Meet the Press,” Trump argued that stronger economic data should not be treated as a reason for tighter policy.

According to Trump, good reports are causing markets to fall because investors expect higher rates. He said there is no reason to raise borrowing costs and that the Fed should actually lower rates.

Trump called rate hikes the wrong move and argued that economic success itself can help reduce inflation. He said higher rates would make managing government debt harder and limit spending priorities, including military investment.

Although Trump has repeatedly said Fed Chair Kevin Warsh should make independent decisions, his latest remarks show the White House remains uncomfortable with tightening expectations.

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