Goldman pushes Fed cut to December

Interest rates are back to being a “not yet” story. Goldman Sachs just pushed its forecast for the Federal Reserve’s next rate cut to December 2026, one quarter later than before. That sounds like a small calendar tweak, but it changes the message in a big way — the bar for cutting is higher than markets hoped, and some Fed officials are openly saying hikes cannot be ruled out. (bloomberg.com) ### What changed? Goldman’s economists moved their expected first cut from September to December, and their next one to March 2027. (bloomberg.com) The basic reason is sticky inflation — especially the kind that does not cool fast enough to let the Fed relax — plus labor data that still look firm enough to keep policymakers cautious. (cmegroup.com) ### Why does one quarter matter? Because the whole rates debate had been about when easing starts. If the first cut slips by three months, borrowing costs stay high through more of the year for mortgages, credit cards, business loans, and commercial real estate refinancing. A December start also leaves the Fed with fewer chances to cut in 2026 unless the economy weakens more sharply later on. (bloomberg.com) ### What did Goolsbee actually say? Austan Goolsbee, who runs the Chicago Fed, said all interest-rate options are on the table right now. That is the notable part. Not because a hike is suddenly the base case, but because a Fed official felt the need to say cuts are not the only possible move. When central bankers talk that way, they are telling markets not to get too comfortable with the idea that lower rates are around the corner. (bloomberg.com) ### What did the jobs report do? It made the Fed’s job harder. The latest reporting around the April payrolls number said the U.S. added 115,000 jobs, stronger than expected, which undercut the case for a near-term cut. A labor market that is still creating jobs gives the Fed more room to wait, because officials do not have to rush to support growth if hiring is holding up. (federalreserve.gov) ### Why is inflation still the problem? Because the Fed can live with slower growth more easily than it can live with inflation reaccelerating. If price pressures stay sticky — or get another boost from energy and supply shocks — cutting too early risks looking like a mistake. That is why the tone has shifted from “when do cuts begin?” to “how long do rates need to stay restrictive?” (news.bloomberglaw.com) ### What are markets looking at now? Fed-watchers are focused on probabilities for each FOMC meeting rather than assuming a smooth path to lower rates. CME’s FedWatch tool tracks those market-implied odds, and the point of tools like that right now is simple — traders are constantly repricing the first plausible cut as each inflation and jobs report lands. (msn.com) ### Does this mean no cuts at all? No. It means the path got narrower and later. Goldman still sees cuts coming, just not soon. And Goolsbee’s comment cuts both ways — if growth weakens or inflation cools faster, the Fed could still ease. But right now the center of gravity has moved toward waiting. (seekingalpha.com) ### Bottom line The important shift is not just Goldman’s new December call. It is the combination of delayed private-sector forecasts, resilient jobs data, and Fed officials refusing to promise cuts. Basically, higher-for-longer is back as the main story. (bloomberg.com) (cmegroup.com)