On June 7, Bloomberg reported that David Mericle, Goldman Sachs' chief U.S. economist, revised the timeline for potential rate cuts in a report released on June 5. The firm has pushed back its expectations for two rate cuts, originally anticipated in December 2026 and March 2027, to June and December 2027, respectively.
The revision is primarily based on May's employment data, which showed a stronger-than-expected labor market, leading analysts to conclude that the Fed is less likely to expedite monetary easing. Goldman Sachs has also lowered its unemployment rate forecast from 4.6% to 4.4%.
However, Goldman Sachs does not view the possibility of rate hikes as a primary scenario. Mericle stated that the likelihood of inflation becoming self-sustaining is low. While the probability of a rate hike has increased from 10% to 20%, it is still considered a low-probability scenario.
Goldman Sachs' baseline forecast now includes two rate cuts of 0.25 percentage points in 2027, with the likelihood of this scenario decreasing from 40% to 30%. This indicates a delay in rate cuts, while the possibility of rate hikes has slightly increased.
Investment in artificial intelligence (AI) has also been identified as a variable. If demand for AI-related investments remains strong, it could support economic activity and funding needs, reinforcing the case for prolonged high interest rates. The market views robust employment and increased AI investment as factors that simultaneously lower expectations for Fed rate cuts.
* This article has been translated by AI.
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